Sunday, June 8, 2008

CONTROL

According to Koontz and O’Donnell, “Managerial control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans.”

“Management control is the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of an organization’s objective.” R.N.Anthony

Control is the continuous process of measuring actual performance against standards or targets and taking corrective action if there are any deviations in the actual performance.

Controlling is the process of regulating the activities toward a pre-determined goal. It ensures that the strategies are implemented according to the plans and that the desired results are obtained. The control function plays a major role in the organization’s growth and the progress due to the certain factors:

Ø It helps in detecting environment changes that influence the organization’s goals.
Ø It helps managers to detect irregularities in the business operations.
Ø It helps managers to identify opportunities.
Ø It helps in maintaining adequate control in large and complex organizations.
Ø It helps in minimizing costs and increases the output of the organization.
Ø It helps managers to delegate authority to their subordinates to take decisions.

Steps of Basic Control Process

Determining Areas of Control

Establishing/ Setting standards

Measuring Performance

Comparison of performance with standards

Recognizing Positive Performance

Taking Corrective Actions

Adjustments in Standards & Measures

Determining area of Control: Based on the objectives and goals of the organization, the manager should determine the significant area where control is essential.

Establishing/Setting Standards: Standards are the criteria against which actual performance is measured and indicates the acceptable level of performance. Control standards are of different kinds- quantitative standards, cost standards, time standards, and qualitative standards.

Measuring performance: After establishing the control standards, the actual performance should be measured. The manager should ensure that the measurement of the performance is accurate, reliable, simple and objective.

Comparing performance with standards: The actual performance is compared with the control standards to ensure that the actual performance conforms to the standards. Management by exception, personal observation, and management by walking around the work areas are some of the techniques to measure performance.

Recognizing positive performance: Manager should recognize the positive performance of subordinates and appreciate it with good remarks and rewards. This motivates employees towards efficient performance.

Taking corrective action: Corrective actions should be taken if there are any serious deviations between the actual performance and the established standards.

Adjusting standards and measures: The performance standards should be reviewed regularly to match the environment conditions and organizational situations.


TYPES OF CONTROL


Feed Forward Control Concurrent Control Feedback Control







Feed forward Control: It is a future oriented control and is considered to be pre-control, pre-action, or preliminary control. It is a control technique that predicts future problems and develops measures to prevent them. It puts standards on input by checking of Manpower, Machines, Money and Material quality.

Concurrent Control: This is also known as Steering Control. This system checks actual performance and ensures that it conforms to the set standards. This control technique is used during the implementation of the activity. Quality control inspections, approval of requisitions, and safety checks are some examples of this control, which are to be exercised at the time of processing of the goods and services.

Feedback Control: This is also known as Post action control. In this, actual performance is compared with the established standards to detect any deviations after the output we get in hand. Based on the information about the results of performance, corrective action is taken to adjust the performance. Accounting records, disciplinary actions, etc., are some of the examples of this control.

Besides these controls, the control system has two more types called as Cybernetic and Non-cybernetic control.
o Cybernetic control system is a computerized and self-regulating control system, which monitors situations and takes corrective actions.
o Non-cybernetic control system depends on human discretion. Complex areas of control need managerial discretion for corrective action to be taken and deviations to be minimized.

TECHNIQUES & MAJOR ORGANIZATIONAL CONTROL SYSTEM

Financial Control

Budgetary Control

Quality Control

Inventory Control

Operational Control

Computer Based Information System

Financial Control
Financial control can be exercised through the use of various tools and techniques. Widely known control techniques in this are financial statements and ratio analysis. The financial statements include Profit & Loss Account, Balance Sheets, Income statements, Cash Flow Statements and Fund Flow statements etc.
Ratio analysis is the process of determining and evaluating financial ratios. A ratio is an index that measures one variable relative to another and it is expressed as a percentage of a rate. Ratio analysis is useful in comparing data such as current performance with past performance, the firm’s performance with its competitors, etc. The important ratios used in organizations are Liquidity ratios, Asset management ratios, Debt management ratios and Profitability ratios.
Besides this, we have two new techniques in this control. Those are:
(iv) Economic Value Added (EVA)
(v) Market Value Added (MVA)
EVA is the difference between the actual profitability of the company and normal rate of return on investment.
MVA is the difference between the market value of the company at the beginning of the year and at the end of the year.
Budgetary Control
“Budgets are the formal quantitative statements of the resources allocated for the execution of activities over a given period of time and include information about projected income, expenditure and profits.” James Stoner, R. Edward Freeman & Daniel R. Gilbert.
Budgeting is the process of formulating plans for the organization for a given period of time and estimating the amount of resources required to carry out the planned activities.
We can use Budgets as standards for comparing the performances of different departments, sub-departments and the employees.
Quality Control
The process of monitoring specific activities to determine the compliance of their quality with relevant quality standards and identifying ways to eliminate causes of unsatisfactory performance is called Quality Control.
It ensures superior quality of goods and services to be matched to the needs and preferences of customer.
The tools can help to improve the quality of goods and services are:
(i) Quality Circle (QC).
(ii) Total Quality Management (TQM).
Quality Circle: It is a group of experts, which generally belong to a particular department of an organization and meet regularly to solve their problems at work so the quality can’t be hampered.
Total Quality Management: It is a wider concept of control on quality. It can be explained as:
· It is the department of Quality Management.
· It carries out daily checks on quality.
· It ensures and try to provide extended quality.
· It works towards continuous improvement in quality.
· It works on quality by adopting new techniques, by planning, by control etc.
Inventory Control
Inventory includes Raw Material, Work in Progress and finished goods. Inventory control involves stocking the materials and resources needed for the execution of organizational activities. Inventory comprises of huge investment. Maintaining the inventory at proper level helps managers to overcome the problem of uncertainty of supply and demand. Proper control can be done with the following methods:

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