Focus of Control: Meaning, Features and Levels

After reading this article you will learn about:- 1. Meaning of Focus of Control 2. Features of Critical Points 3. Levels.

Meaning of Focus of Control:

Control is measuring actual performance, comparing it with standard performance, finding deviations and adopting measures to check the deviations. In a small organisation, managers can check every activity of members by adopting appropriate control devices but as organisations increase in size and complexity, managers cannot control all activities of the organisation single handedly.

They are occupied with many important managerial activities to inspect and control every organisational activity. Besides, this is costly and time-consuming. Managers should, therefore, focus on the critical points or areas of control which best reflect organisational goals.

Poor performance in these areas indicates deviations from the standards and requires the control system. This is called the principle of critical point control. It determines the critical points where actions should be monitored. Most significant elements in the operation system are selected and control is exercised only on those points/elements rather than the entire operation.

“Effective control requires attention to those factors critical to evaluating performance against plans.” The key areas are “those aspects of the unit or organisation that have to function effectively in order for the entire unit or organisation to succeed.”

Features of Critical Points:

Critical points or key areas of control have the following features:

1. Critical points relate to vital areas of operation which affect the entire operation. For example, critical area in the production process is inputs. Effective control on the right quantity and quality of inputs smoothens the production process. Best sales promotion efforts and marketing strategies cannot produce the desired results if quality of output is not good. The quality of output depends on the quality of inputs. Control in this area, therefore, produces useful results for management.

2. Critical points aim to prevent the damage rather than cure it (prevention is better than cure). Heavy investment (capital budgeting) is made in plant and machinery before production. If quality control is exercised after the output is produced, defect in the product will make the entire batch of output useless.

Money invested in production also goes waste. If heavy investment is involved, it may even force the company to liquidate. A sample production run is performed and tested for quality before producing at mass scale.

3. Critical points indicate financial performance of the company before preparing financial accounts. Accounts are prepared at the end of the financial year (31st March every year). If there are losses, corrective actions can be taken only to improve the future performance. Checking of accounts at regular intervals can prevent the company from incurring losses.

4. Managers require lot of information to carry out the production process smoothly. Acquiring information (through computers or surveys) is costly in terms of time and money. Managers want economical and useful information. A thorough cost-benefit analysis should be carried for every bit of information.

5. Critical points relate not only to tangible features (production, sales, profits) but also to intangible features of the organisation. Developing human resource, exploring their potential to work, satisfying their needs, identifying the motivators is also focused upon.

Levels of Focus of Control:

The focus of control is exercised at three levels:

1. Operating Level,

2. Tactical Level, and 

3. Strategic Level.

1. Operating Level Controls:

Controls at operating level are usually exercised by lower-level managers. They implement operating plans relating to day-to-day activities of the firm.

They deal with monitoring of resources like:

(a) Physical resources:

Managers control physical resources like machines, equipment’s, raw material, semi-finished goods and final output. Physical resources help in generating output to achieve the short-run and long-run objectives of the firm.

(b) Human resources:

Control of human resources aims at sound recruitment, selection, training, placement, performance appraisal and compensation policies for the employees.

(c) Information resources:

There should be control over access to right type of information at the right time.

(d) Financial resources:

It is a scarce organisational resource. Funds are allocated to various units in the enterprise and controls are adopted to ensure that money is spent effectively. Financial resources are controlled through budgets, ratios and financial audits.

2. Tactical Level Controls:

They control the departmental objectives and plans by monitoring departmental performance at regular intervals of time. These controls are exercised by middle- level managers.

3. Strategic Level Controls:

These controls are adopted by top level managers. They ensure that strategic plans are implemented effectively. They assess the impact of environmental factors on organisational policies. Various external factors like technology, competition, government regulation, suppliers, customers etc. affect organisational plans and, therefore, managers constantly monitor the environmental or external factors.

In case of unstable environment which keeps changing frequently, monitoring should be done at shorter intervals, say monthly or quarterly while in relatively stable environmental conditions, monitoring at longer intervals, like half-yearly or annual reporting can be effective.

Peter F. Druckerhas identified eight key control areas. These are: market standing; innovation; productivity; physical and financial resources; profitability; manager performance and attitude; development, worker performance and attitude; public responsibility.