After reading this article you will learn about updating controls in an organisation.
Controls prove to be effective as long as they do what they are intended to do. The control devices are initially designed with a certain set of expectations and under specific situations or circumstances. If circumstances and expectations within the organisation keep on changing, there is need to review and, if possible, update or even replace control techniques. But this does not happen regularly.
Most managers are tradition-bound and conservative. They have a non-experimental outlook. The reason is easy to find. The managers have secured control over key decisions in the enterprise but the shareholders have to bear the consequences of those decisions. This has altered the weight in the balance of risk and reward.
The gains to a manager from, say, a successful investment decision are much less than the penalty for failure. The preservation of his position — i.e., his persona] survival as manager — now carries more weight than the successful outcomes of new ventures.
For him, the ‘downside risk’ is greater than its opposite. Management has, therefore, on a perfectly rational calculation, become more timid and will not purse profit-maximisation, even if that pursuit is possible: a business executive is not an entrepreneur.
The implication is that managers and workforce alike put a value on leading a quiet life rather than welcoming or tolerating the pressures on them which are associated with profit-maximising levels of activity.
In other words, most managers tend to feel comfortable with the things as they are. Everyone likes the security that accompanies routine. This desire for security and the resultant familiarity leads to an acceptance of systems or procedures that might have outlived their utility.
Familiarity with existing principles and practices for years together often becomes the excuse for avoiding the effort to re-examine, refine and improve.
Needless to say, these efforts could bring discomfort and insecurity. But a continuous repetition of the past implies a lack of planning for the future. By relying on controls that are in force, organisations fail to make use of the preventive potential of the controlling process.
Thus, when instant changes are planned or occur in operations, managers should start examining how adequate the present controls will be for the changes that are planned or already exist. In short, controls need to be current.