UNIT- 3: Staffing and Controlling (Part 2)

    

Part 2- Controlling

Control is any process that guides activity towards some predetermined goals. Thus control can be applied in any field such as price control, distribution control, pollution control, etc. However, control as an element of management process can be defined as the process of analysing whether actions are being taken as planned and taking corrective actions to make these to conform to planning. Thus control process tries to find out deviations between planned performance and actual performance and to suggest corrective actions wherever these are needed. For example, Terry has defined control as follows:

“Controlling is determining what is being accomplished, that is evaluating the performance and, if necessary, applying corrected measures so that the performance takes place according to plan.”

Based on the definition of control, its following features can be identified:

1.  Control is forward looking because one can control future happenings and not the past. However, on     control process always the past performance is measured because no one can measure the outcome of     a happening which has not occurred. In the light of these measurements, managers suggest corrective     actions for future period.

2.  Control is both an executive process and, from the point of view of the organisations of the system, a result. As an executive process, each manager has to perform control function in the organisation. It is true that according to the level of a manager in the organisation, the nature, scope, and limit of his control function may be different as compared to a manager at other level. The word control is also preceded by an adjective to designate a control problem, such as, quality control, inventory control, production control, or even administrative control. In fact, it is administrative control, which constitutes the most comprehensive control concept. All other types of control may be subsumed under it.

3.   Control is a continuous process. Though managerial control enables the manager to exercise control at the point of action, it follows a definite pattern and timetable, month after month and year after year on-a continuous basis.

4.  A control system is a coordinated-integrated system. This emphasizes that, although data collected for one purpose may differ from those with another purpose, these data should be reconciled with one another. In a sense, control system is a single system, but it is more accurate to think of it as a set of interlocking sub-systems.

 

Scope of Control:

For effective control, it is important to know, what are the critical areas where control would be exercised? The identification of these areas of control enhances the management to (i) delegate authority and fixing up of responsibility (ii) reduce burden of supervising each activity in detail and (iii) have means of securing satisfactory results. Though controls are needed in every area where performance and results directly and vitally affect the survival and prosperity of the organisation, these areas need to be specifically spelled out. The following discussion points out the problems and methods of control in each major area.

1.  Controls over Policies: Policies are formulated to govern the behavior and action of personnel in the organisation. These may be written or otherwise, policies are generally controlled through policy manuals, which are generally prepared by top management. Each individual in the organisation is expected to function according to policy manuals.

2. Control over Organisation: Organisation charts and manuals are used to keep control over organisation structure. Organisation manuals attempt at solving organisational problems and conflicts, making long-range organisational planning possible, enabling rationalisation of the organisation structure, helping in proper designing and clarification of each part of the organisation, and conducting periodic check of facts about organisation practice.

3.  Control over Personnel: Generally, personnel manager or head of the personnel department, whatever his designation may be, keeps control over personnel in the organisation. Sometimes, a personnel committee is constituted to act as ail instrument of control over key personnel.

4.  Control on Wages and Salaries: Control over wages and salaries are done by having programme of job evaluation, and wage and salary analysis. The functions are carried on by personnel and industrial engineering departments. Often wage and salary committee is constituted to provide help to these departments.

5.  Control over Costs: Control over costs is exercised through making comparison between standard costs and actual costs. Standard costs are set in respect of different elements of costs. Cost control is also supplemented by budgetary control system, which includes different types of budgets. Controller's department provides information for setting standard costs, calculating actual costs, and pointing out differences between these two.

6.  Control over Methods and Manpower: Control over methods and manpower is keep to ensure that each individual is working properly and timely. For this purpose, periodic analysis of activities of each department is conducted. The functions performed, methods adopted, and time consumed by every individual is studied to eliminate nonessential functions, methods, and time. Many organisations create separate department or section known as organisation and methods' to keep control over methods and manpower.

7.  Control over Capital Expenditure: Control over capital expenditure is exercised through the system of evaluation of projects, ranking of projects on the basis of their importance, generally on the basis of their earning capacity. A capital budget is prepared for the business as a whole. The budget committee or appropriation committee reviews the budget. For effective control over capital expenditure, there should be a plan to identify the realisation of benefits from capital expenditure and to make comparison with anticipated results. Such comparison is important in the sense that it serves as an important guide for future capital budgeting activities.

8.  Control over Service Departments: Control over service departments is effected either (i) through budgetary control within operating departments, or (ii) through putting the limits upon the amount of service an individual department can ask, or (iii) through authorising the head of service department to evaluate the request for service made by other departments and to use his discretion about the quantum of service to be rendered to a particular department: Sometimes, a combination of these methods may be used.

9.   Control over Line of Products: A committee whose members are drawn from production, sales, and research departments exercise control over line of products. The committee controls through studies about market needs. Efforts are made to simplify and rationalise the line of products.

10. Control over Research and Development: Control over research and development is exercised in two ways: by providing a budget for research and development and by evaluating each project keeping in view savings, sales, or profit potentialities. Research and development being a highly technical activity is also controlled indirectly. Improving the ability and judgment of the research staff through training programmes and other devices does this.

11. Control over Foreign Operations: Foreign operations are controlled in the same way as domestic ones. The tools and techniques applied are the same. The only difference is that the chief executive of foreign operations has relatively greater amount of authority.

12. Control over External Relations: The public relations department regulates external relations. This department may prescribe certain measures to be followed by other departments while dealing with external parties.

13. Overall Control: Control over each segment of the organization contributes to overall organisational control. However, some special measures are devised to exercise overall control. This is done through budgetary control project profit and loss account and balance sheet. Integrating and coordinating budgets prepared by each segment prepare a master budget. The budget committee reviews such budget that this budget acts as an instrument for overall control. Profit and loss account and balance sheet are also used to measure the overall results.

 

Types of Control: 

Most control methods can be grouped into one of the two basic types:

·     Past-oriented Controls:- These are also known as post-action controls and measure results after the process. They examine what has happened in a particular period in the past. These controls can be used to plan future behaviour in the light of past errors or successes.

         Future-oriented Controls:-  These are also known as steering controls or feed-forward controls and are designed to measure results during the process so that action can be taken before the job is done or the period is over. They serve as warning-posts principally to direct attention rather than to evaluate e.g.: Cash flow analysis, funds flow analysis, network planning etc.

Control Process: 

The various steps in controlling may broadly be classified into four parts:

1.    Establishment of Control Standards: Every function in the organisations begins with plans, which are goals, objectives, or targets to be achieved. In the light of these, standards are established which are criteria against which actual results are measured. For setting standards for control purposes, it is important to identify clearly and precisely the results which are desired. Precision in the statement of these standards is important In many areas, great precision is possible. However, in some areas, standards are less precise. Standards may be precise if they are set in quantities - physical, such as volume of products, man-hour or monetary, such as costs, revenues, and investment. They may also be in other qualitative terms, which measure performance. After setting the standards, it is also important to decide about the level of achievement or performance, which will be regarded as good or satisfactory. There are several characteristics of a particular work that determine good performance. Important characteristics, which should be considered while determining any level of performance as good for some operations are: 

      (i) output, 

      (ii) expense, and 

      (iii) resources. 

    

    Expense refers to services or functions, which may be expressed in quantity, for achieving a particular level of output Resources refer to capital expenditure, human resources, etc. After identifying these characteristics the desired level of each characteristic is determined. The desired level of performance should be reasonable and feasible. The level should have some amount of flexibility also, and should be stated in terms of range -maximum and minimum. Control standards are most effective when they are related to the performance of a specific individual, because a particular individual can be made responsible for specific results. However, sometimes accountability for a desired result is not so simply assigned; for example, the decision regarding investment in inventory is affected by purchase, rate of production and sales. In such a situation, where no one person is accountable for the levels of inventories, standards may be set for each step that is being performed by a man.

 

2.     Measurement of Performance: The second major step in control process is the measurement of performance. The step involves measuring the performance in respect of a work in terms of control standards. The presence of standards implies a corresponding ability to observe and comprehend the nature of existing conditions and to ascertain the degree of control being achieved. The measurement of performance against standards should be on a future basis, so that deviations may be detected in advance of their actual occurrence and avoided by appropriate actions: Appraisal of actual or expected performance becomes an easy task, if standards are properly determined and methods of measuring performance which can be expressed in physical and monetary terms, such as production units, sales volume, profits, etc. can be easily and precisely measurable. The performance, which is qualitative and intangible, such as human relations, employee morale, etc., cannot be measured precisely.

 

For such purposes, techniques like psychological tests and opinion surveys may be applied. Such techniques draw heavily upon intuitive judgment and experience, and these tools are far from exact. According to Petor Drucker, it is very much desirable to have clear and common' measurements in all key areas of business. It is not necessary that measurements are rigidly quantitative. In his opinion, for measuring tangible and intangible performance, measurement must be (i) clear, simple, and rational, (ii) relevant, (iii) direct attention and efforts, and (iv) reliable, self-announcing, and understandable without complicated interpretation or philosophical discussions.

 

3.   Comparing Actual and Standard Performance: The third major step in control process is the comparison of actual and standard performance. It involves two steps: 

        (i) finding out the extent of deviations, and 

        (ii) identifying the causes of such deviations. 

    When adequate standards are developed and actual performance is measured accurately, any variation will be clearly revealed. Management may have information relating to work performance, data, charts, graphs and written reports, besides personal observation to keep itself informed about performance in different segments of the organisation. Such performance is compared with the standard one to find out whether the various segments and individuals of the organisation are progressing in the right direction. When the standards are achieved, no further managerial action is necessary and control process is complete. However, standards may not be achieved in all cases and the extent of variations may differ from case to case. Naturally, management is required to determine whether strict compliance with standards is required or there should be a permissible limit of variation. In fact, there cannot be any uniform practice for determining such variations. Such variations depend upon the type of activity. For example, a very minute variation in engineering products may be significant than a wide variation in other activities. When the deviation between standard and actual performance is beyond the prescribed limit, an analysis is made of the causes of such deviations. For controlling and planning purposes, ascertaining the causes of variations along with computation of variations is important because such analysis helps management in taking up proper control action. The analysis will pinpoint the causes, which are controllable by the person responsible. In such a case, person concerned will take necessary corrective action. However, if the variation is caused by uncontrollable factors, the person concerned cannot be held responsible and he cannot take any action.

 

Measurement of performance, analysis of deviations and their causes may be of no use unless these are communicated to the person who can take corrective action. Such communication is presented generally in the form of a report showing performance standard, actual performance, deviations between those two tolerance limits, and causes for deviations. As soon as possible, reports containing control information should be sent to the person whose performance is being measured and controlled. The underlying philosophy is that the person who is responsible for a job can have a better influence on final results by his own action. A summary of the control report should be given to the superior concerned because the person on the job may either need help of his superior in improving the performance or may need warning for his failure. In addition, other people who may be interested in control reports are (i) executives engaged in formulating new plans; and (ii) staff personnel who are expected to be familiar with control information for giving any advice about the activity under control when approached.

 

4.      Correction of Deviations: This is the last step in the control process, which requires that actions should be taken to maintain the desired degree of control in the system or operation. An organisation is not a self-regulating system such as thermostat which operates in a state of equilibrium put there by engineering design. In a business organization this type of automatic control cannot be established because the state of affairs that exists is the result of so many factors in the total environment.

 

Thus, some additional actions are required to maintain the control. Such control action may be

            (i)     review of plans and goals and change therein on the basis of such review;

            (ii)   change in the assignment of tasks;

            (iii) change in existing techniques of direction;

            (iv) change in organization structure; provision for new facilities, etc.

 

In fact, correction of deviation is the step in management control process, which may involve either all or some of the managerial functions. Due to this, many persons hold the view that correcting deviations is not a step in. the control process. It is the stage where other managerial functions are performed. Koontz and O’Donnell have emphasized that the overlap of control function with the other merely demonstrates the unity of the manager’s job. It shows the managing process to be an integrated system.

 

Control Techniques (Traditional and Modern):

A variety of tools and techniques have been used over the years to help managers control the ctivities in their organizations. There can be control in different perspectives. Time control relate to deadlines and time constraints, material controls relate to inventory control etc. Various techniques of control are discussed in this lesson.

 

Effective Control System:

Control is necessary in every organisation to ensure that everything is going properly. Every manager, therefore, should have an effective and adequate control system to assist him in making sure that events conform to plans. However, control does not work automatically, but it requires certain design. While the basic, principles involved in designing a control system in organisations may be universal; the actual system in an organisation requires some specific design. In this tailoring of Control system, there are certain requirements, which should be kept in mind.

1.   Reflecting Organisational Needs: All control systems and techniques should reflect the jobs they are to perform. There may be several control techniques, which have general applicability, such as, budgeting, costing, etc. However, it should not be assumed that these might be utilised in all situations. The- managers should choose an appropriate tool for control, which helps him in controlling actions according to plans.

2. Forward Looking: Control should be forward looking. Though many of the controls are instantaneous, they must focus attention as to how future actions can be confirmed with plans. In fact the control system should be such that it provides aid in planning process. This is done in two ways: it draws situations where new planning is needed, and it provides some of the data upon which plans can be based.

3.   Promptness in Reporting Deviation: The success of a thermostat lies in the fact that it points the deviation promptly and takes corrective actions immediately. Similarly, an ideal control system detects deviations promptly arid informs the manager concerned to take timely actions. This is done through designing good appraisal and information systems.

4.   Pointing out Exceptions at Critical Points: Control should point exception at critical points and suggest whether action is to be taken for deviations or not Some deviations in the organisations have any impact while others, though very little in quantity may have great significance. Thus, control system should provide 'information for critical point control and control on exception. The critical point control stresses that effective control requires attention to those factors critical to appraising performance against an individual plan. The control on exception requires that a manager should take corrective action when there is exceptional deviation. The more a manager concentrates his control efforts on exceptions, the more efficient will be the results of his control.

5.   Objectives: The control should be objective, definite, and determinable in a clear and positive way. The standards of measurement should be quantified as far as possible. If they are not quantifiable, such as, training effectiveness, etc. they must be determinable and verifiable. If the performance standard and measurement is not easily determinable, many subjective elements enter into the process, which catch the controller and controlled on wrong tooting.

6.  Flexible: Control system should be flexible so that it remains workable in the case of changed plans, unforeseen circumstances, or outright failures. As Geotz has remarked, a control system should report such failures and should contain sufficient elements of flexibility to maintain managerial control of operations despite such failures. Having alternative plans for various probable situations can provide much flexibility in control. In fact, flexible control is normally achieved through flexible plans.

7.   Economical: Control should be economical and must be worth its costs. Economy is relative, since the benefits vary with the importance of the activity the size of the operation, the expense that might be incurred in the absence of control and the contribution the control system can make. The economy of a control system will depend a great deal on the manager’s selecting for control only critical factors in areas important to him. If tailored to the job and the size of the enterprise, control will be economical. A large-sized organisation can afford highly complicated techniques, sophisticated tools of control and more elaborate system of control, but a small-sized organisation cannot afford these because of the cost factor.

8. Simple: Control system must be simple and understandable so that all managers can use it effectively. Control techniques which are complicated such as complex mathematical formulae, charts, graphs, advanced statistical methods and other techniques fail to communicate the meaning of their control data to the managers who use them. Effective control requires consistency with the position, operational responsibility, ability to understand, and needs of the individuals concerned.

9.   Motivating: Control system should motivate both controller and controlled. While the planning and control are necessary for economical operations, researches in human relations show that planning and control are, more often than not, antagonistic to good human relations. Sometimes, they may even tend to deprive the people in the organizations one of man's basic needs - a sense of powerful and worthwhile accomplishment. The design of control system should be such that aims at motivating people by fulfilling their needs.

10. Reflecting Organisational Pattern: The control should reflect organisational pattern by focusing attention on positions in organization structure through which deviations are corrected. Organisation structure, a principal vehicle for coordinating the work of people, is also a major means of maintaining control. Thus, in every area of control, it is not enough to know that things are going wrong unless it is known wherein the organisation structure the deviations are occurring. This enables managers to fix up the responsibility and to take corrective actions.