Process and Step of Controlling in Management!
Process of Controlling in Management:
K. Boulding states that the barest essential of any organization is a control mechanism. Control is the key factor. If the control mechanism fails, plans and programmes will also fail. A control mechanism or control process has five basic elements.
They are as follows:
1. Establishment of standards of performance
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2. Measurement of actual performance
3. Comparison of actual performance with the original standards
4. Taking corrective action
5. Feedback
Process # 1. Establishment of Standards:
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A standard is a criterion against which future results can be measured. Such standards may be tangible or intangible. A standard should be tangible, for better evaluation. It should be clear and meaningful. Performance standards are expressed in terms of cost, quality, quantity and time.
Standards like employee morale, discipline, public relations, image of the concern, etc. cannot be easily quantified, as they are intangible. Quantitative standards can be determined by statistical methods such as sampling.
Process # 2. Measurement of Actual Performance:
The very purpose of control is to check or measure the actual performance. If the standards prescribed are tangible, it is easy to measure the performance in similar units. If the standards are intangible, it is difficult to measure the performance. Work, operations and turnout should be observed, measured and facts collected. Statistical data, reports, opinions, accounting information, etc. will help in measuring the actual performance.
Process # 3. Comparison of Actual Performance with the Original Standards:
After measuring the actual performance, it has to be compared with the original standards. The comparison may disclose either agreements or deviations from the standards established. But the manager has to be very clear about the concept of deviation: minor or negligible deviations may be ignored, but major and significant deviations should be correctly understood. For this, the manager must have his own range of tolerance, which he can fix with his knowledge and experience.
Process # 4. Taking Corrective Action:
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As soon as deviations are reported, the concerned manager should take steps to correct the action. This is essential because measurement of performance should not become just a ritual or post mortem of past events. If the deviation is significant, then the original standard itself has to be rechecked.
Corrective action should be taken immediately, without any loss of time. Corrective action may be improving the methodology, techniques, organizational structure, proper selection, training and remuneration of workers, or even effective communication and successful motivation.
Corrective action may be either to cure or to prevent such deviations. Wherever possible, automatic, self-regulating mechanisms should be introduced to bring back performance in line with the original plan.
Process # 5. Feedback:
Feedback is an important element in the control process. It ties together all the elements of the control mechanism. The controller will receive feedback information regarding actual performance in comparison with the original standards. If the feedback is positive and reveals accomplishment, the manager must encourage and appreciate the subordinates.
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If the feedback brings negative results, the manager has to take corrective action and alter the operations accordingly. Feedback will help in getting information well in time about the work performance, and it also motivates people.
Process of Control:
The process of control consists of the following steps:
Step # 1. Determine the Areas of Control:
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It is not possible for managers to control every activity and workers also do not like that every activity is controlled by higher levels. Managers determine the key areas where controls should be developed. These areas best reflect the organisational performance (critical point control).
Step # 2. Setting Standards:
Standards are the basis for evaluation of performance. They are related to goals of the enterprise. They are the specific criteria to be fulfilled by the workers. “A standard is a desired outcome or expected event with which managers can compare subsequent activities, performance or change.”
Standards are useful for the following reasons:
i. They enable employees to know their limitations of work and expectations of managers.
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ii. They enable employees to know their abilities to perform according to standards. If they feel they cannot achieve the standard performance, training can increase their potential.
iii. They coordinate individual goals with organisational goals.
Standards have the following features:
i. They should be achievable.
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ii. They should be objective that is, based on scientific analysis and not guesswork.
iii. They should be flexible. They should be subject to change according to circumstances.
iv. They should be framed in consultation with employees. Standards framed with workers’ participation are better accepted and achieved by them.
v. They should be reviewed periodically and altered from time to time. Standards may be quantitative or qualitative. Quantitative standards are set in monetary terms which can be measured and qualitative standards are set in non-monetary or intangible terms which cannot be measured precisely.
A company can set the following standards:
(a) Time standards – They specify the time that employees should take to complete the work.
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(b) Production standards – Production standards specify the units that should be produced within the time standards. For example, the company can set production standard that employees should produce 10 units of product A in one hour.
(c) Cost standards – The products must be cost effective to generate maximum profits. Cost standards specify per unit cost of products. For example, cost standards can specify: Cost of product A should not exceed Rs.5 per unit.
(d) Quality standards – Quality standards maintain the quality of goods. Goods should be cost effective and qualitative in nature.
(e) Behavioural standards – These standards specify how employees should behave with the peer group, superiors and people outside the organisation, such as customers. Employees should be courteous and polite with work groups internal and external to the organisation. These standards increase employees’ morale and job satisfaction.
Step # 3. Measurement of Performance:
After setting the standards, workers perform according to these standards. Managers measure their performance from time to time. Quantitative performance can be better monitored as against qualitative performance. Whether or not workers are polite or courteous cannot be easily measured. Personal observation, performance reports, sample checking etc. are some of the ways in which data on performance can be gathered.
Step # 4. Comparison of Performance against Standards:
After measuring the actual performance, it is compared with standard performance.
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Two possible situations may arise on this comparison:
i. Actual performance is equal to or more than standard performance.
ii. Actual performance is less than standard performance, that is, standards have not been achieved.
In the first situation, though no corrective action is required, managers should appreciate workers’ positive performance and offer them rewards; financial (bonus, increments) or non-financial (recognition and prestige). The nature of rewards varies with the needs of employees.
In the second situation, when there are deviations in the actual work performance, the deviations may be significant or insignificant. If the deviation is not significant (deviation within the range of acceptance), it may be ignored but if it is significant, it should be brought to the notice of top managers. This is in keeping with the principle of Management by Exception. The principle states that since managers are pre-occupied with many important organisational matters, every matter should not be reported to them.
Only exceptional matters where performance significantly deviates from the standards should be brought to the notice of top managers for remedial action. “Management by exception is a control principle which suggests that managers should be informed of a situation only if control data show a significant deviation from standards.”
Step # 5. Correction of Deviations:
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After detecting the deviations, managers ensure that deviations do not occur again. The problem may lie in initiative to work or standards may have to be revised because they are sub-optimal or over-optimal.
The corrective action can be:
(a) Immediate:
Managers correct the deviations immediately to avoid major problems. In the production process, for example, if deviations occur at the transformation stage, they should be corrected immediately, otherwise the final output will not sell in the market.
Immediate action may involve; hiring additional staff, removing existing staff, training the staff, change in leadership style, or change in motivators.
(b) Permanent:
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Permanent actions remove the cause of deviations so that deviations do not recur in future.
The fault may not always lie with execution of standards. The standards and the measures of performance can also be faulty. Managers may, therefore, have to revise the plans and reform them. A new selection policy, for example, for reshuffling the employees may be helpful rather than hiring and firing employees within the existing employment standards.
Steps in Controlling: How to Control Employees?
Controlling is a systematic process involving comparisons, measurement and evaluation of organisational goals.
The steps involved in controlling are as follows:
1. Establishing Standards:
The first step of controlling is to establish the performance standards. Standards are a level or a degree of attaining a certain operation or performance. It is like a rule or principle of quality, quantity, grade, etc., to achieve.
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These standards vary in detail and complexity, which measure the tasks, requirements and operations of a business. These are units of measurement used to evaluate results to which superiors /subordinates should comply to and perform every step accordingly.
Following are some standards followed in organisations:
(i) Quantitative Standards:
Quantitative standards are standards that are measured and expressed numerically. These standards can be in the form of time, costs, incomes, profits, etc.
Some examples of quantitative standards are given below:
(a) Time Standard:
Time standards are specific standards set on the basis of time taken to do a particular activity in a business unit. This involves defining a particular work covered at a specified time, or determining standard minute or work unit wherein it takes X minutes to produce the 1st component of a product, Y minutes to produce the 2nd component of the same product, etc.
(b) Cost Standard:
Cost standards refer to setting standards of costs of resources like labour, raw materials, etc., as a means for budgetary control. A business’ possible incomes and spending are pre-determined to control the level of profits they can make (possibly at a certain time period).
(ii) Qualitative Standards:
Qualitative standards are non-measurable or intangible standards which cannot be measured monetarily. Examples for such standards include performance of a manager, deviations of workers either by absenteeism or shirking, attitudes towards work or other concerns.
For example- as per manufacturing standards set by the Bureau of Indian Standards (BIS), Liquefied Petroleum Gas (LPG) gas cylinders used for cooking purposes in residential households include specific chemical composition of ethane, propane, butane, etc. LPG manufacturers consider these quantitative specifications during the manufacturing process.
As LPG is flammable and can be hazardous to life, workers work in safe and healthy environment with protective gears and masks. These qualitative specifications on health and safety are suggested by BIS but implemented through training programs and manual instructions in plants by LPG manufacturers.
2. Measuring Actual Performance:
Measurement of actual performance involves two inter-linked processes.
Controlling process measures the deviations in the efforts and results of the resources discussed below:
(i) Efforts:
Controlling process measures the performance of efforts put by resources. For measuring performance of efforts, the qualitative and quantitative aspects of (human and physical) resources are determined. These aspects include examining whether the resources have conformed to the rules and procedures, or whether the resources were optimally and efficiently used, or whether there was work attendance or punctuality maintained.
(ii) Results:
The results of efforts of resources can be measured in terms of quality, quantity, costs and time. The results are measured in terms of deviations within the efforts of the resources and includes determining the number of errors or wastes created, number of units produced, whether the produced units reached the customer on time, whether the production/service processes deviated (more/less) from the budgeted expenditures, etc. The results also attempt to determine the employee morale, attitude of workers, communication with their superiors, and so on.
3. Compare Results with Standards:
The third step in controlling process involves comparison of actual results and performance with the predetermined standards. The comparison expresses parameters requiring relevant action, i.e.
Need for action = Desired performance – Actual performance
For example- a powerloom in a textile mill that can produce 10,000 metres of fabric in 4 hours produces 1,000 metres of fabric less than the total set specfication. The management then compares and determines the processes in the fabric plant have been able / unable to achieve the prescribed standards and identify the exact processes to be changed for maintaining the prescribed standards. The management will also compare the costs of raw materials (yarn, equipment, maintenance, etc.), overhead costs, profit margins and so on to take corrective actions.
4. Analysing Deviations:
At this stage deviations are analysed. Deviations are things that vary or are different from the expected standard or norm. The study of such deviations also implies that businesses have prescribed processes and pre-determined tolerance limits across all activities in a business and variations from such limits should be controlled.
There are two principles regarding analysing deviations:
(i) Principle of Critical Point Control:
According to this principle, there is systematic monitoring at strategic control points in a process. This means that within a set of tasks in a business activity, managers should identify certain points that play a critical role in ensuring the actual work will be completed as per specific norms. These are known as Key Result Areas (KRAs), if not given attention to, can lead to unfavourable results or losses to businesses.
Managers should thus focus mostly on such significant KRAs and should not be involved in insignificant activities. For example, a 5% increase in labour costs in a manufacturing unit is more unfavourable than 20% increase in the cost of stationery items. The one of the most significant KRAs for this manufacturing unit is the labour costs.
(ii) Management by Exception:
Management by exception is also known as control by exception that focuses on identifying and handling specific cases that deviate from the standards or norms. According to this principle, there are possibilities of certain situations that deviate from normal business processes, which need to be cared for, usually through human intervention. For example- a deviation of labour costs by Rs. 5,000 can be reported to the HR manager, but a deviation of labour costs by Rs. 50,000 can be reported to the functional Vice President to take necessary actions.
5. Take Corrective Actions:
The final step is to take any necessary action/s to correct problems or make improvements. These corrective actions attempt to save on valuable time, energy, and other resources by focussing attention on high-priority areas. If the performance is lower than the prescribed standards (known as negative deviation) then it is a problematic situation for which more resources and costs have to be incurred.
Conversely, if the performance is higher than the prescribed standards (known as positive deviation) then it becomes an opportunity situation, which organisations can exploit to carve a niche in the market and gain higher market share. In the fabric manufacturing example, the management can confirm for any defects in the powerloom and the final fabric that produced only 9,000 metres of fabric instead of 10,000 metres. They could evaluate the costs of rectifying the defect on the basis of time, energy usage, labour requirement for the powerloom or continue using the powerloom to produce 9,000 metres of fabric if the fabric has no defects.
The Control Process: Top 4 Steps
The process of control involves the following steps:
Step # 1. Establishment of Standards:
The first step in the control process is establishing standards. Standards set the benchmarks for measuring performance later on. Simply stated, a standard is the level of expected performance for a given goal—for example reducing the “reject rate from 15 to 3 per cent” or “reducing the number of accidents to one per each 1 lakh hours of labour”. Such standards should be challenging and should aim for improvement over past performance.
Standards can be set for any activity—financial activities, operating activities, legal matters, etc. For- example standards for production activities might include volume of output (how much to produce in quantity terms) defects, on time availability of finished goods (time use) and rupee expenditures (for raw materials, labour etc.).
It is better to express standards in numerical terms so that everyone is able to understand them. They should be expressed clearly and stated in a precise and accurate manner. They must, however, be achievable—that is, one should be able to reach them by putting in requisite effort.
Step # 2. Measurement of Actual Performance:
The second step in control process is the measurement of actual performance. Here the actual performance of employee is measured against the standard fixed for his job. This should be done in an objective manner. Where standards are expressed in numerical terms, measurement does not create problems. Managers’ measure performance through personal observation, statistical reports, oral and written reports etc. Of course it is not possible to measure each and everything.
To save time and energies, managers focus attention on key or strategic points only—especially while measuring performance at top level. Performance is generally checked once the task is accomplished. At times, however, measurement of work may be done even during the performance, and certain adjustments, are made in the case of production of certain commodities. Sometimes performance may by checked on the completion of each phase in the production and in the case of assembling task, each part in checked before assembling.
Whenever it is not possible to measure performance prior to completion (of the items produced) then measurement is done after accomplishing the task. Even when measurement during the performance is possible management may not practice it due to cost incurred in doing so. Cost becomes one of the important variables affecting measurement during performance. If cost incurred is not much and time consumed is also ignorable, then measurement during the work is advisable.
Step # 3. Comparison of Actual Performance with Standard:
The comparing step determines the degree of variation between actual performance and the standard. Some variation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of variation. Deviations in excess of this range become significant and receive manager’s attention. All such deviations may be due to errors in planning, defective implementation or careless performance of the operatives.
As a matter of fact, only major or exceptional deviations should be communicated to top management in the form of reports. This is known as ‘management by exception’. The principle of management by exception states that control is enhanced by concentrating on the exceptions to or significant deviations from the standard. In other words, while comparing actual performance with a predetermined standard, managers need to focus attention to the exception.
For example, controlling the quality of components produced on an assembly line might indicate that only five pieces per 1000 fall out of line. To ensure effective control, management should investigate these five components—the exceptions—further.
Step # 4. Taking Corrective Action:
The last and final step in the control process is taking corrective action, when required. Corrective steps are initiated by managers with a view to rectify the defects in actual performance.
The steps are:
i. Remedial Steps:
If actual performance for example, falls short of standards due to non-availability of materials, managers try to procure these materials and thus set things in order. It is due to poor results shown by employees, it could be rectified through the introduction of attractive incentive plans. Thus, a corrective action may involve a change in methods, rules, procedures etc.
ii. Revising Standards:
Sometimes, variations might occur due to an unrealistic standard. That is, the goal may be too high or too low. In such cases, managers try to set things in order by revising the standards altogether.
iii. Other Rectificational Steps:
Corrective action, includes the change in strategy, structure, compensation practices, training programmes, redesign of jobs, replacement of personnel, re-establishment of budgets or standards, etc.
iv. Immediate or Basic:
Corrective action may be immediate or basic. Immediate corrective action corrects something right now but gets things back on track. This is, therefore, temporary in nature. Basic corrective action, however, is concerned with permanent solution to the problem of serious deviations. A manager should not mind revising the standard when the standard is set at an unreasonably low or high level. High standards pose insurmountable problems to operators and breed discontentment and frustration. Low standards make employees docile and unproductive.
Stages in the Control Process:
The basic control process involves in the following stages:
Stage # 1. Setting Standards:
The total workload of the organization is divided into departments, sections and individuals. Each of them has specific objectives for detail operation. These objectives are set in physical terms such as quantities of product, units of service, labour hours, speed of rejections or they may be expressed in monitory terms such as volume of sales, costs, capital expenditures or profits or it may be expressed in any other verifiable qualitative terms.
These standards should be clearly defined so that the comparing of performance becomes possible. At the same time the responsibility should be identify with definite individuals in the organization and he is accountable for the lapse, if the performance differs from the standard determined. Determination of standards may be discussed with S-O-G-P chain (Standard – Objectives – Goals – Purpose).
It is a measuring rod for the accomplishment of organizational objectives. These objectives aim at achieving organizational goals, which is the ultimate purpose of every organization.
Stage # 2. Measurement of Performance:
The next step in control is to measure actual performance of different individuals, groups or units in the light of standards. Management should not depend upon the guess that standards are being achieved. It should measure the performance and compare that performance with the standards. Quantitative measurement should be done if the standards are determined in numerical terms. This makes comparison pass and simple. In all other cases, the performance is measured in terms of qualitative factors.
For example, performance of industrial relations manager may be measured in terms of attitudes of workers, frequency of strikes and morale of workers. Attitude and morale of workers cannot be measured quantitatively but they should be measured qualitatively. If standards are suitably drawn and if means are available for determining exactly what workers are doing, appraisal of actual or expected performance is fairly easy.
Stage # 3. Comparing Performance with Standards and Ascertaining the Cause of Difference, if any:
The responsibility of a manager will not end with measuring the performance. Deviations from the standard must be noted and the causes of such deviations are ascertained. This is the third stage of control process. The causes of factors responsible for deviations may be such as defective materials, machinery, process etc. A detail analysis should be done as close to the point of performance as possible. It helps in quick location of defects and results in correction with minimum lose.
Stage # 4. Adopting Corrective Measures:
The final step in the control process involves taking remedial actions so that deviations may not occur again and the objectives of organization are accomplished. Managers must take correct decisions to meet immediate needs.
Process of Control: (4 Basic Elements)
According to K. Boulding, the barest essential of any organisation is a control mechanism. Where control mechanism fails, plans also fail and where plans succeed, controls also succeed.
The control mechanism represents four basic elements:
(1) Setting of standards of performance at strategic points;
(2) Leading, motivating and supervising employees;
(3) Measurement of actual performance and its comparison with the’ stated standards of performance—monitoring and reviewing activities of the supervisor;
(4) Corrective action, when necessary.
Control standards are derived directly from the objectives, specifications and other goals established in the process of planning. These goals or objectives should be associated closely with individual responsibilities, e.g., in management by objectives or results. Control standards should be simplified by concentrating only on strategic or vital points.
They should offer prompt, economical, comprehensive and balanced checks. Given proper control standards, effective leadership, motivation and supervision, the control function, i.e., checking and reporting on performance and taking prompt corrective action, if necessary, should be very easy.
1. Setting Standards:
While setting standards is part of planning, it is also a control activity. Without performance standards there is no use measuring actual performance. A standard is a rule for measuring. It is defined as a unit of measurement established to serve as a model or criterion.
Performance standards are expressed in terms of:
i. Quantity.
ii. Quality,
iii. Time, and
iv. Cost.
We may have measurable or quantitative standards and non-measurable or qualitative standards. Sometimes, we have indirect measurement- For example, high employee morale might be measured in terms of a certain labour turnover (2 p.c.), absenteeism rate (4 p.c.) or grievance rate (2 grievances filed per 50 employees per month).
If we have higher rates of turnover, absenteeism and grievances, it means employee morale is relatively lower. In production of goods we have both quantity as well as quality- standards to be accomplished. We have not only to determine standards at strategic points but also to lay down allowable variances against which results can be measured.
Critical Areas of Control:
i. Sales volume and expenses;
ii. Credit;
iii. Advertising;
iv. Capital expenditure;
v. Flow of funds;
vi. Costs;
vii. Liquidity;
viii. Labour turnover;
ix. Labour absenteeism;
x. Safety;
xi. Employee performance;
xii. Services to customers;
xiii. Research and development;
xiv. Project management.
The operations function of an organisation is the heart of the control process.
In bigger companies we may have standards established for all key result areas such as profitability, market position, productivity, product leadership, personnel development, employee attitudes, and public responsibility. Please note that standards are not limited to levels of employee performance. They are applicable to all phases of corporate operations.
2. Supervision:
Supervision-cum-leadership is the second element of control mechanism with reference to the control of employee performance. Supervision or overseeing the work as it progresses will increase the efficiency and economy of ongoing operations.
The amount of supervision as an element of control depends upon the expertise of the supervisor, the ability and skill of subordinates and the nature of the work environment. In theory X type of employee behaviour, we have close supervision, while in theory Y type employee behaviour we have- minimum supervision.
Self-motivated employees manage through self-control and need little external supervision and control to achieve the targets.
Conditions most favourable for high motivation to accomplish the targets as per plan are:
i. Challenging and meaningful work,
ii. Recognition for better performance (monetary or otherwise),
iii. Promotion by merit,
iv. Participation in decision-making process and
v. Enlightened leadership.
Effective supervision and control should motivate employee to action and controls should be the means to the end of goal accomplishment and not ends in themselves. Willing co-operation is what management wants from employees.
Supervision should gain acceptance for controls from subordinates by using two-way communication, encouraging employee-participation, avoiding too many controls and allowing self-control wherever feasible.
Supervision or overseeing to ensure action as per plan is only one side of the supervision coin. It must include the other side, viz., human relations skill. Under management by objectives, certain jobs, employees, and work groups may require closer supervision and less participation than modern motivation theory recommends.
But MBO is closely tied in with motivation and it permits satisfaction of higher employee needs in deserving cases. Greater freedom and challenge are often possible over time and this will depend on the employee performance, his willingness to take more responsibility, and the job potential for enlargement.
MBO is a good solution for the motivation and supervision problems. Some people prefer certainty to uncertainty. They want closer supervision. MBO allows this sort of person to be closely supervised. In short MBO is flexible relating to supervision as an element of control.
3. Comparison:
Supervision takes place while the work is being performed. Comparison occurs later and is concerned with completed results.
Comparison has two steps:
(1) Measurement of actual performance and
(2) Comparison of actual and planned performance and the feed-back of results to the manager for evolving corrective actions.
Measurement of performance against the standards will tell us if performance is at, below or above the established standards. Performance can be measured by using accounting data, by counting output, by checking on quality, by time calculations and by estimating employee attitudes. Control charts are used to measure product quality. Stop watch, Gantt chart can be used for measurement of time.
PERT is the modern time measurement technique. PERT is a tool for the control of time. Budgets and breakeven-analysis measure costs and revenues. Monitoring or measuring and reviewing or evaluation of performance may be considered the heart of the control mechanism.
4. Corrective Action:
Feedback of results leads to the final element in the control mechanism, viz., correcting deviations and variances from established standards. Corrective action will involve either correcting unfavourable deviations from stated standards or goals (which represent planned performance) or alterations in our future performance standards or plans.
Corrective action can be immediate to rectify the present situation without waste of time so that we can restore the normal position quickly. Corrective action can also be basic and we may have to find the root cause of deviation and then remove the same in due course. For example, basic cause may be inadequate or poor equipment and machinery.
In that case we will have to install new or improved equipment in order to obtain planned output. Corrective action may demand improvement in selection, training and remuneration of employees. It may demand special measures of motivation to motivate qualified people when they give below-standard performance.
Management may be required to provide meaningful work, recognition for high performance, promotion tied to performance, participation in decision-making and above all supportive leadership for inducing qualified people to do an excellent job.
Manager is the controller. He controls adherence to a predetermined ‘framework of management,’ viz., adherence to objectives, plans, policies, procedures, organisational structures, and so forth. The basis of control is information in the hands of managers. Control decisions are based on information. Management information system is the basis for managerial decision-making.
Feedback Concept:
The concept of feedback is vital in the process of control as it ties together all the elements of control mechanism. The feedback covers both measurement of performance and its evaluation. The manager-controller receives feedback information regarding actual performance against planned objective or goal.
If the feedback reveals accomplishment of objective, the manager must commend and congratulate subordinates through open recognition and appreciation.
This will enhance the employee morale. However, if the feedback reveals significant deviations from the set standards or plans, the manager will have to take some form of corrective action to improve the performance results. He may have to modify ongoing operations, change the resource-mix or if necessary, modify the goal, standard or plan itself.
Significant deviations must be reported in time to the higher managerial executives so that modifications can be introduced in plans, operations, resources, standards and so forth.
Feedback on work performance has dual role:
(1) Individuals get information essential for improvement in their work performance.
(2) Feedback can contribute toward intrinsic (inner) motivation.
When a challenging objective or goal has been achieved or even surpassed and the subordinate is officially told about it through recognition and appreciation, he has a sense of achievement and a feeling of competence. It gives him ego satisfaction. Such intrinsic motivation enhances self- control of the employee and he is ready to accept increasing responsibility.
Persons provided with feedback of accomplishment of goals can show will to work longer and harder without additional extrinsic rewards. Please note that intelligent and trained employees are motivated more by intrinsic rewards than by mere extrinsic rewards. For self-motivation controls should provide prompt feedback.
The comparison of the feed forward and feedback concepts. The continuous lines indicate the system of inputs-process-outputs. The broken lines represent flow of information (feedback and feed forward). The dotted lines are for corrective action on the basis of feedback and feed forward (both controls are essential).
Feed forward (predictive) control monitors critical inputs and suggests preventive measures in the form of corrective action—correcting inputs/process.
Feedback control monitors or evaluates output variables and suggests remedial or corrective action—correcting inputs/ process.
Corrective actions based on feedback and feed forward will assure outputs as per our set standards or desired values of outputs.
Cash planning and control system, PERT planning and control, preventive maintenances, all types of policies, input check-lists are the best examples of future directed (feed forward) controls aimed at preventing present and future deviations from plans.
To overcome the handicaps of feedback (after the fact) control, the concept of feed forward or future directed or preventive control has been suggested. Thus, we can control critical inputs as well as output variables.
Steps in a Control Process: (Top 4 Steps)
The control process is a continuous flow between measuring, comparing and action.
There are four steps in the control process:
1. Establishing performance standards,
2. Measuring actual performance,
3. Comparing measured performance against established standards, and
4. Taking corrective action.
Step 1 – Establish Performance Standards – Criteria for Evaluation:
Standards are created when objectives are set during the planning process. A standard is any guideline established as the basis for measurement. It is a precise, explicit statement of expected results from a product, service, machine, individual, or organizational unit. It is usually expressed numerically and is set for quality, quantity, and time.
For example- a car manufacturing company can set an objective to produce 1000 cars in a month, which are capable of giving 15 Kilometre mileages in one liter of petrol.
Standards and measurements for everything from sales and production targets to worker attendance and safety records may be set. For this step to be effective, the standards must be specified in meaningful terms and accepted by the individuals involved. The methods of measurement should also be accepted as accurate. Ideally, criteria for evaluation should be quantifiable and measurable. However, in actual practice all criteria for evaluation are not quantifiable.
Step 2 – Measure Actual Performance:
Supervisors collect data to measure actual performance to determine variation from standard. Written data might include time cards, production tallies, inspection reports, and sales tickets. Personal observation, statistical reports, oral reports and written reports can be used to measure performance.
Management by walking around, or observation of employees working, provides unfiltered information, extensive coverage, and the ability to read between the lines. Written reports are more detailed and have the advantage of extensive coverage.
Step 3 – Compare Measured Performance against Established Standards:
Does performance match the standards? In many ways, this is the easiest step in the control process. The complexities presumably have been dealt with in the first two steps; now it is a matter of comparing measured results with the targets or standards previously set. If performance matches the standards, managers may assume that “everything is under control”; and, if they do not, managers have to intervene actively in the organization’s operations.
Step 4 – Take Corrective Action:
The fourth and final step in the control process is taking managerial action. When managers find a deviation in the actual performance as compared to the standards, they can choose among three possible courses of action. They can do nothing; they can correct the actual performance; or they can revise the standards. Because doing nothing is fairly self-explanatory, let’s look more closely at the other two.
Correct Actual Performance:
If the source of the variation in actual performance has been deficient work activities or actions, the manager would take corrective action. Examples of such corrective action might include changes in strategy, structure, compensation practices, or training programs; job redesign; or the replacement of personnel.
Revise the Standard:
It is possible that the variance was a result of an unrealistic standard that is, the goal may have been too high or too low. In such cases, it is the standard that needs corrective attention, not the performance.
Unless managers see the control process through to its conclusion, they are merely monitoring performance rather than exercising control. The emphasis should always be on devising constructive ways to bring performance up to standard, rather than merely identifying past failures.
Controlling Implementation Stages: Top 4 Stages
Controlling should be introduced gradually, so that the business’s directors and managerial staff are capable of adopting the new way of thinking.
The process of implementing the concept of controlling comprehensively comprises four major stages:
1. Preparation,
2. Development,
3. Implementation and
4. Utilization.
They are presented in Fig. 7.2.
1. The first stage of controlling implementation is concluded by the initial adaptive analysis. Not only does it concern the possibilities of the system being adapted to the existing business structure and to the organization and management technique, but also to the employee approach towards the planned changes and their systems of values.
The subject of the analysis are the core and ancillary production units which may, in the future, be separated into independent units responsible for their performance. The analytic and diagnostic phase of building the controlling system is also aimed at specifying the important shortcomings of the project of changes which is being developed.
In addition, its purpose is to identify the elements necessary for the improvement of the organization and management system. This stage is crucial for the successful implementation of the controlling process.
It draws the managers’ attention to any irregularities occurring in the business, and it reveals the pluses and minuses of the currently applied solutions. Moreover, it enables the employees to familiarize themselves with new concepts which describe and explain the business’s operation and development in the new economic conditions.
The quality of work carried out in the first stage is significant for the success of the entire process of implementing the controlling process.
2. The second stage consists of creating the controlling system and devising its detailed structure, according to the sequence presented in Fig. 7.3.
The sequentially defines the principles of constructing the controlling system, as well as the rules of cooperation between the controller and the managers of the separated units.
The initial works provide more details to the goals which are set for controlling. Accomplishing these goals will facilitate pursuing the strategy adopted by the managers. The development stage also requires that the normative base (referring to core and ancillary production processes) which is adapted to the new management concept, is verified, supplemented and prepared (often from the beginning).
The planning procedure should be in the form of an instruction, including the specimens of planning, record and accounting documents, as well as a timetable for passing information.
3. The third stage is made up of the process of implementing the controlling system in practice on the basis of the adopted concept. Thus, an implementation team must be appointed, which is to be supported by knowledge and experience of the external specialists.
The team decides on the commencement of the implementation works after the prior selection of how the controlling process is going to be organized, and the proper manner of appointing the chief controller, who watches over the efficient operation of the entire system. These decisions are determined by numerous factors, mainly by the size of the business and the way its management is organized.
4. The fourth stage is the utilization of the implemented controlling system. Initially, the developed system is being tested without punishing employees either financially or through disciplinary procedures.
New principles of planning tasks are applicable, and the extent of their execution is being evaluated. Measures of the employee assessment are connected with the remuneration system, but bonuses are paid out according to the rules which have been binding thus far.
This results from the necessity to accustom employees with the new rules of the business’s operation and from the desire to minimize the number of people who are skeptical towards the introduced changes. The controlling system, once developed and implemented, cannot be yet regarded as the perfect one.
Only after many years of utilizing the system may the adopted assumptions and solutions be verified, and are able to be compared with the economic reality. This applies both to the organizational aspect, as well as to the way of management.
When the system is highly flexible, it allows to introduce constant changes in order to adapt it to the specific character of a given business in the best way possible.
Conditions of Implementing the Controlling Process:
When introducing the controlling process in the business, it is essential to take account of certain conditioning factors, i.e.:
i. Internal conditions (including qualities of an organization system and individual management problems),
ii. External conditions (including higher competitiveness, type of the environment and its stability),
iii. Problems to be solved,
iv. Existing models of controlling,
v. Implementation methodology,
vi. Other factors,
A vital determinant of the shape of the corporate controlling is a list of problems to be solved in a particular business. They can include the threats pertaining to losing the business’s liquidity, excessive stock or too high costs of production. Controlling might be helpful in dealing with them provided it is adequately oriented.
Implementing the advanced concept of controlling requires the business’s management staff to be well-qualified. Therefore, when implementing controlling, it is important for the employees to be properly trained.
Managers of the highest hierarchical level ought to take part in seminars on controlling, and then refer other employees to such trainings. By and large, the scope and subject of the seminars are related to the roles which are fulfilled by particular employees in the business.
While decentralizing the management system in the business, it is important to specify the criteria to be followed in this process.
The following are considered the most significant ones:
i. Nature of the environment in which a given business operates, determined by the market properties, competitive pressure, or availability of raw materials and supplies,
ii. Size of the organization and the pace of its growth,
iii. Assessment of the cost and risk of making a specific decision,
iv. Top management’s preferences,
v. Skills of managers at lower hierarchical levels.
The overriding condition to introduce the corporate controlling is that a full support is given by the management to a controller entrusted with this task. The controller is presented with high demands.
Apart from the great knowledge of Economics, they should also possess such qualities as- analytical skills, objectivity, and ability to work in a team. Moreover, it should be made clear that effective implementation of controlling is conditional upon adopting the team-oriented style of management.
An indispensable requirement, which, if met, enables a quick adaptation and efficient operation of the controlling system, is the necessity to restructure the planning and control system.
Before a decision on introducing controlling in any business area is arrived at, it must be established whether such an intention is justified. Consequences of such an undertaking are much too serious to decide on its implementation without deep analysis. One should bear in mind that it is not necessary to introduce controlling in a business in order to make changes in its operation.
At this stage, an analysis of the strategic potential of the selected area which is vital for the future rise in the businesses’ effectiveness and competitiveness might be helpful.
Process of Controlling
Control functions ensures that the results of operations confirm to the established goals and predetermined standards
The essential elements of any control process are:
1. Establishment of Goals and Standards:
The first and foremost step in the control process is the setting or establishment of standards i.e. to know what should be the result. A standard is a criterion against which results can be measured. The actual performance of the organization is judged against the standard. Standards are the plans or the targets which have to be achieved in the course of business function. Standards can be expressed quantitatively or qualitatively.
i. Measurable or tangible / specific – Those standards which can be measured and expressed are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc.
ii. Non-measurable or intangible / abstract- There are standards which cannot be measured monetarily. For example – performance of a manager, deviation of workers, their attitudes towards a concern, etc. are known as intangible standards.
2. Measurement of Actual Performance:
Measuring the actual performance against the pre-determined standards is the second step in the process of control. This will enable the management to determine whether the work is being done in accordance with the plans or not. Measurement of performance becomes easy if appropriate standards have been set and means are available for exact determination of the performance. When standards are expressed in quantitative terms, the comparison of performance with standards is comparatively easier.
However, it is difficult to measure the qualitative factor such as motivation, job satisfaction, leadership, morale, public relations, etc. A manager can adopt various techniques like budget, personal observation etc. for measuring the performance.
3. Comparison of Actual Performance with the Standard:
The third step in the control process is the comparison of actual performance with the standards. In this step, the manager finds out the difference between the actual performance and the planned performance. The manager has to find out the extent of deviation and cause of deviation.
4. Corrective Action:
After finding out the deviations, managers should go deep into the problem for finding out the reasons for the deviations. The most important step in the control process is that of taking corrective action so that deviations may not occur again and the objectives of the organization are accomplished. The deviations may be positive or negative.
i. Positive Deviation- indicates that the actual performances are better than the established standards.
ii. Negative deviation- indicates that the actual performance is less than the established standards.
In case the deviation is negative an enquiry should be made as to why actual results were not meeting the standards. The manager has to assess the causes of deviation and suchcauses may be inaccurate forecast, inadequate communication, improper planning defective machines, lack of motivation, ineffective supervision etc.
Thus manager should take necessary rectification measures. Corrective actions includes : Re-setting the standards, re-allocation of duties to employees, modification in organization structure, providing motivation to employees or giving adequate training and selecting the employees. After taking corrective action, the management must do a follow-up. Follow-up is done to find out whether the corrective actions are taken properly.
Process of Controlling in Management:
Control is an ongoing process. It has some subparts.
Regardless of the type or levels of control systems, any control process has four fundamental steps:
1. Establishment of Goals and Standards:
The first step in the control process is to establish goal, plan, norm, standard or other yardsticks against which subsequent performance will be compared. These standards are the specific objectives against which progress can be measured. These are set in the planning stage.
Generally, performance standards serve three important purposes:
(a) Standards reflect expected and planned results. They help employees understand what is expected of them and how their work will be evaluated.
(b) They provide a basis for finding deviations from fixed targets.
(c) They help reduce the potential negative effects of goal incongruence.
Standards can be of several types. Basically, they may be quantitative or qualitative. Quantitative standards deal with number, quantity or units and may further be classified as physical standards, cost standards, revenue standards, capital standards, and time standards. Qualitative standards deal with attitudes, behaviour, image, growth or relationships.
To be effective, control standards must possess certain features:
(i) Standards should be stated in quantitative terms and should be measurable.
(ii) They should be consistent, economic and understandable.
(iii) They should be realistic expectations for performance.
(iv) They Should.be related to the organisational goals.
(v) The should be based on past performance projected into the future.
(vi) They should identify key areas and strategic points for control. They should concentrate on results. They must be flexible and acceptable by all.
(vii) They should be objective and developed through detailed studies. They should be related to the performance of specific individuals.
Griffin states that a final aspect of establishing standards is to identify performance indicators. Performance indicators are measures of performance that provide information that is directly relevant to what is being controlled. It is also important for the controlling manager to define a range of tolerable deviation within which normal performance should lie.
2. Appraisal of Performance:
Once performance standards have been established, actual performance of work must be measured. Performance measurement is a constant activity for most organisations. Performance measures must be valid and realistic. Employee performance is measured daily, weekly or monthly. It is often measured in terms of quality or quantity of output.
The common methods used by managers to measure actual performance are personal observation, statistical reports, oral reports and written reports. A combination of these may increases the reliability of information. Besides, what we measure is more critical to the control process than how we measure. The wrong criteria can result in harmful consequences. The performance of some activities is difficult to measure in quantifiable terms. Hence, qualitative performance measures can be used in such cases.
3. Comparing Performance against Standards:
The third step in the control process is comparing measured performance against established standards. Performance may be higher than, lower than or equal to the standard. This step determines the degree of variation between actual performance and the standard.
Some variation in performance can be expected in all activities. But some deviations are critical and significant. Hence managers must determine which deviations are critical and need to be corrected. In this stage of comparison, managers are concerned with the size and direction of the variation.
4. Taking Corrective Action:
The final step in the control process is taking corrective action. Taking appropriate corrective action is a basic condition for effective control. The manager must find the real cause before taking action. For this, a careful analysis is necessary. It requires manager’s analytic and diagnostic skills.
After comparing performance against control standards, one of three actions can be taken:
(a) Maintaining the status quo – When performance essentially matches the standard, no action is needed.
(b) Correct the deviation – When there has been deficient performance, a corrective action is required on the part of the manager. Such corrective actions might include changes in strategy, structure, compensation policies, or training programmes and the replacement of employees.
(c) Revise the standard – If the work standard was set up too high or too low at the beginning, it should be revised. If the circumstances have changed, standards must be changed.
Process of Controlling:
The process of control consists of the following steps:
Step # (1) Establishment of Standards:
The first step of the control process is to establish with which the actual results are to be evaluated. A standard is the criterion against which actual performance can be compared. Different types of standards are used for measuring the performance of different individual.
Physical Standards are those expressed in physical terms, e.g. number of units, man-hours etc. Monetary Standards are expressed in monetary terms e.g. sales revenues, expenses etc. In addition to these tangible standards there are intangible standards like reputation of the firm etc.
As the standards serve as the basis of control, they should be set very carefully.
The standards for control should satisfy the following requirements:
(a) Standards should be simple and easily understandable.
(b) Standards should be capable of achievement with reasonable amount of effort and time.
(c) Standards should be flexible and not rigid. These should be capable of being modified whenever necessary.
(d) It should be consistent with the overall objectives of the organisation.
(e) It should be set scientifically with the help of time and motion studies. It should be objective;
(f) As far as possible it should be expressed in quantitative terms.
(g) It should as far as possible, be set in consultation with people who are to achieve them.
Step # (2) Measurement of Performance:
Once the standards for desired performance are fixed, the next step is to measure the actual performance. Performance should be measured in the same terms in which standards have been established. Accurate and timely measurement of results requires effective systems of reporting.
As far as possible, the measurement should be on a future basis, so that deviations can be predicted. It means knowing not only what has happened but also what is likely to happen. Therefore, measurement should be done while the activity is still in operation.
Step # (3) Appraisal of Performance:
The actual performance is then compared with the standards. Such comparison will reveal the deviations from the standards. Management should establish a range of deviations beyond which the attention of top managers is warranted.
Only such exceptional deviations should be reported to top management. It is a waste of time and effort to concentrate on each and every minor deviation. Focusing on critical deviation is known as control by exception. It helps to conserve managerial time, effort and talent.
Step # (4) To Find the Cause of Deviations and the Correction of Deviations:
Every significant deviation is analysed to find out why it has occurred. This will help in finding out who are responsible for deviations. This step is taken by the manager responsible for the contract.
The action to be taken may be either – (i) review of plans and goals and changes therein on the basis of this review or (ii) change in the assignment of task or (iii) change in the existing techniques of direction and control or (iv) change is organisation, structure; or (v) making provisions for new facilities. The necessary steps must be taken as early as possible. Otherwise after completion of work or lapse of time, there will be no use of it.
Step # (5) Strengthening the Organisation:
The line between the control function and other function of management is not clear-cut. Planning is a pre-requisite; controls should be tailored to fit the organisation. The organisational concept of authority and responsibilities relates directly to the problem of maintaining a system of checks of the managerial activity of sub-ordinates. So organisation should be strengthened first to overcome the weakness of deviations.
Step # (6) Determination of Controllable Cost and Control Period:
Optimum control can be achieved only if critical points can be identified. Good control of a situation does not mean maximum control. It is often expensive. So one secret of good control is to establish strategic points where corrective action will be cheapest, easiest and most effective.
Taking Corrective Actions:
The next step in the control process is taking appropriate actions so that deviations may not occur again and the objectives of the organisation are achieved. Corrective action may involve revision of standards, reassignment of duties, training of workers, changes in the style of direction etc. If the actual performance is found to be satisfactory and standards are defective, standards will be changed in the light of observations.
Otherwise improvements will have to be made in organisation structure, staffing and direction. Thus, control function may require changes in all other functions of management.
To Conclude:
Franklin E. Folts suggested that – after a fixed interval, the whole process and procedure of control should be reviewed. They must be modified according to plans and goals to fit realities as conditions change. Some management experts do not accept it as a step in the process of control but it must be there.