The management process consists of five functions: planning, organizing, staffing, directing and controlling. Thus, control is part of the control process.
Control is the main objective function of management in an organization: the process of comparing actual performance against established company standards. Each manager must monitor and evaluate the activities of his subordinates. Management control helps to take corrective actions on the part of the manager in a timely manner to avoid unforeseen circumstances or financial losses for the company.
The basic control process includes three steps:
- Setting standards.
- Measuring performance against these standards.
- Correction of deviations from standards and plans.
As part of the organization's overall strategic plan, leaders set goals forunits in specific, precise, operational terms that include planning for performance against actual results.
Standards against which actual performance will be compared can be derived from past experience, statistics and benchmarking (based on industry best practices). To the extent possible, standards are developed on a bilateral basis rather than top management making decisions unilaterally based on the goals of the organization.
Why is managerial control necessary?
If staff always did what is best for the organization, there would be no need for control and management. But it is clear that people are sometimes unable or unwilling to act in the best interests of the organization and a set of controls must be put in place to prevent unwanted behavior and encourage desired action.
Even if employees are properly equipped to do their job well, some choose not to because individual goals and organizational goals may not be exactly the same. In other words, there is no alignment of goals. In such cases, steps need to be taken to increase employee motivation and productivity.
An effective organization is one in which managers understand how to manage and control. The purpose of control as a concept and process is to help motivate and guide employees in their assigned roles. Understandingprocess and management control systems is essential to the long-term effectiveness of an organization.
Without enough control systems, confusion and chaos can overwhelm an organization. However, if control systems stifle an organization, it may suffer from a lack of entrepreneurial innovation.
Inadequate control over the implementation of managerial decisions can lead to a decrease in productivity or an increase in the risk of poor financial results at least. In the extreme, if performance is not monitored, organizational failure can result.
Features of an effective management system
An effective business management system is an integrated set of processes and management tools that help align company strategy and annual goals with daily activities, monitor performance and initiate corrective actions.
A management control system is a continuous process of improving performance by setting individual and collective goals that align with the organization's strategic goals, planning performance to achieve those goals, reviewing and evaluating progress, and developing people's knowledge, skills and abilities. The control system should focus on results.
An effective management system has the following features:
- Helps achieve organizational goals.
- Facilitates optimal use of resources.
- Improves overallorganization performance.
- Motivates and boosts employee morale.
- Control also establishes discipline and order.
- Clearly defined and understandable performance metrics.
- Ensures future planning by revising standards.
- Strategic goals apply to all levels of the organization.
- Effective controlling minimizes errors.
- Strengthening management and employee engagement.
- Achieve priority goals faster.
The management control process regulates the activities of companies in such a way that the actual performance corresponds to the plan established in advance. An effective control system allows managers to avoid circumstances that bring losses to the company.
18 management control functions
Management control is any process, tool or system that is set up to enable management to regulate a company's activities in accordance with its objectives.
Controlling is carried out at the lower, middle and upper levels of management. At each level, control will be different: top management will be involved in strategic control, middle management in tactical control, and the lower level in operational control.
The following are the management decision control functions:
- Planning strategy. The process of establishing an action plan to achieve goals.
- Controlrequirements. Formal documentation of plans as requirements and management of changes to those plans as needed.
- Financial control. Monitoring and accounting of the company's budget.
- Performance management. The process of agreeing on a set of goals with employees and evaluating their performance against those goals.
- Control of work. Monitor employees to improve productivity, efficiency and quality of work.
- Program and project management. Implementing change.
- Risk control. A repeated process of identifying, analyzing and eliminating risk.
- Security control. Identification and elimination of security threats, and implementation of ways to reduce various risks.
- Compliance control. Implementation of processes, procedures, systems, audits, measurements and reports in accordance with the laws, regulations, standards and internal policies of the organization.
- Metrics and reporting. Calculation and communication of meaningful measurements of organizational performance.
- Benchmarking. Iterative process of benchmarking results against the company's industry, competitors, or current best practices.
- Continuous improvement. The process of measuring performance, improving it, and measuring it again.
- Quality control. Ensuring that output products meet specifications. For example, implementing a product testing process on a production line.
- Quality assurance. Quality assurance is the process of preventing future quality failures. For example, the practice of investigating the root causes of all failuresto search for production improvements.
- Automation. Increase productivity, efficiency and quality through automation.
- Data management. The practice of collecting information that may be useful in the future, as well as data analysis.
- Stock management. Inventory management and accounting to avoid shortages or surpluses.
- Asset management. Control of assets such as manufacturing facilities, infrastructure, machinery, software and intellectual property.
Types of control and their characteristics
Organizations need controls to determine if their plans have been achieved and take corrective action if necessary. The main goals of control of managerial decisions:
- Adapting to change. The control system can predict, monitor and respond to changing environmental conditions.
- Minimizing errors. Productive managerial control and accounting will limit the number of errors that occur in the activities of the firm.
- Minimizing costs and maximizing profits. If the organization of management control is effectively implemented, it can reduce costs and increase productivity.
Businesses install control systems in a number of different areas and at different levels of management. The responsibility for controlling management decisions is extensive. There are different classifications and characteristics of this control function. One of the most common looks like this:
- Forward control, also known as feedforward control, focuses on the resources an organization extracts from its environment. He controls the quality and quantity of these resources before they reach the organization.
- Monitoring focuses on maintaining the quality and quantity standards of the product or service in the transformation process.
- Final control, also known as feedback control, focuses on the organization's results after the transformation process is complete. Although the final control may not be as effective as the preliminary or current one, it can provide management with information for future planning.
According to another classification, control is divided into two broad categories - regulatory and normative control, and within these categories there are several types. Types of managerial control are shown in the following table.
The following sections describe each type and subtype of control in management activities.
Regulatory control stems from standard operating procedures, prompting criticism of this type of management control implementation as outdated and counterproductive. It implies complete and total control overall areas of the organization.
As businesses have become more agile in recent years due to the flattening of organizational hierarchies and expansion of boundaries, critics point out that regulatory oversight may rather hinder the achievement of the goal. The key from the point of view of controlling the organization of management decisions is the compliance of control with organizational goals.
Bureaucratic control stems from lines of authority that depend on position in the organizational hierarchy. The higher the level of subordination, the more the person will have the right to dictate his policy. Bureaucratic control has gotten a bad rap, and rightfully so. Organizations that rely too much on chain-of-command relationships hinder flexibility in the event of unforeseen situations. However, there are ways in which managers can make a company as flexible and responsive to customer concerns as any other form of management control organization.
How to maintain the chain of command while maintaining flexibility and responsiveness in the system? This is precisely the question that bureaucratic control must solve. One solution is standard operating procedures that delegate responsibility down the hierarchy in the company.
Financial controls govern key financial objectives for which managers are accountable. Such management control systems are common among firms organized as multiple strategic business units (SBUs). SBUis a product, service or geographic line that has managers who are solely responsible for profits and losses. They are accountable to senior management to achieve financial goals that contribute to the overall profitability of the corporation.
This category of management decision control imposes limits on spending. For managers, an increase in expenses must be justified by an increase in income. For department heads, staying on budget is usually one of the key performance indicators.
So the role of financial control is to improve overall profitability as well as to keep costs reasonable. To determine what costs are necessary, some firms will compare the results of other firms in the same industry and then perform a management control analysis. This benchmarking provides data to determine if costs are in line with industry averages.
Quality control describes the degree of variation in processes or products that is considered acceptable. For some companies, the standard is the absence of defects, that is, the absence of any changes. In other cases, a statistically insignificant deviation is acceptable.
Quality control affects the end result of a product or service offered to customers. When a business consistently maintains excellent quality, customers can rely on the attributes of the firm's product or service, but it is alsocreates an interesting dilemma. Excessive quality control of existing products can reduce response to unique customer needs.
Instead of relying on the organization's standard policies and procedures, as in previous types of controlling, regulatory control governs the behavior of employees and managers through generally accepted patterns of behavior.
Regulatory control decides how much a certain type of behavior is right and another is less. For example, a tuxedo might be acceptable attire for an awards ceremony for American businessmen, but completely out of place at an awards ceremony for the Scots, where the formal kilt is more in line with local customs. However, no written dress code was adopted.
Thus, the difference between the regulatory and normative system of control of managerial decisions is a formality. Regulatory control is an informal system of governance, as opposed to regulatory control.
This organization of control over management decisions has become commonplace in many companies. Team norms are informal rules that make team members aware of their responsibilities to their colleagues.
Although the task of the team is usually formally documented, the way the process participants interact is usually developed over time as the team goes through phases of growth. Even the leadership is informally agreed upon: sometimesthe appointed leader may have less influence than the informal leader. If, for example, the opinion leader has more experience than the formal team leader, team members are likely to turn to the opinion leader for guidance that requires specific skills or knowledge.
Team norms tend to develop gradually, but once formed can have a strong impact on company behavior.
Norms based on organizational culture are also a type of normative control. Organizational culture includes the shared values, beliefs, and rituals of a particular organization. Thus, this type of control lies in the correct alignment of norms and goals.
Formal and informal governance systems
It was mentioned earlier that regulatory control and all its subspecies belong to the formal control system, while normative control belongs to the informal one. The table below describes the differences between the two control systems.
Formal management system
Informal governance system
An example of a formal system would be the rules and guidelines used by Human Resources for functions such as recruitment and staff development.
An example of an informal control system is loy alty to the organization and respect for organizational culture as a style of behavior for employees.
The broad categories of regulatory and regulatory oversight are present in almost all organizations, but the relative emphasis of each type varies. Within the regulatory category are bureaucratic, financial and quality controls. The normative category includes command and organizational norms. Both categories of norms can be effective. The task of management is to bring the behavior of employees in line with the goals of the organization.
Therefore, effective managerial control can be achieved in several different ways. Control systems are designed to collect data and use this information to help an organization achieve its goals. The system focuses on the effectiveness of various organizational elements, fromhuman activity to financial results.
An established monitoring system can bring real benefits to a company - point out problems, plan new strategies and ensure better coordination between different departments and divisions.