Controlling (Week 9)

Definition: The process of monitoring, comparing and correcting work performance.

All managers should be involved in the control function even if their units are properly until they have evaluated what activities have been done and have compared the actual performance with the standard.

Why is controlling important?

It is the process of monitoring, comparing and correcting work performing as planned. Managers cannot really know whether their units are performing properly until they compared the actual performance with the standard. Besides that, it is the final link in the management functions. It is the only way managers know whether goals are being met and if not, reason why.

Reasons to control
1) Jobs should be done are being done and that goals being achieved. 2) Employee empowerment 3) Protect organization and its assets. (Must have plans in place to protect the organizations employees, facilities, data and infrastructure)

How controlling relates to other functions

I. Planning Controlling is the final link in the management functions. It helps managers to get information if the organization is on track for goal achievement and whether the activities are going as planned. Just stating plans does not necessarily mean that the goal would be achieved; managers need to follow up to ensure that the tasks which are supposed to be done are actually being done. II. Organizing Organizing involves structure of roles for people to fill an organization. The organization structure makes it easy for managers to control since they know who should do what task, they can find out whether everyone is doing their work they supposed to do.

The control process

The control process is a three-step that involves measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations. The control process assumes that performance standard already exists. Step 1: Measuring How we measure? Four approaches used by managers to measure and report actual performance are personal observations, statistical reports, oral reports and written report. Most managers uses combination of these approaches increasing both number of input sources will increase the probability of getting reliable information. Advantages Get firsthand knowledge Information is not filtered Intensive coverage of work activities Easy to visualise Effective for showing relationships Fast way to get information Allow for verbal and non-verbal feedback Comprehensive Formal Easy to file and retrieve Disadvantages Subject to personal bias Time-consuming Obtrusive Provide limited information Ignore subjective factors Information is filtered Information can't be documented Take more time to prepare

Personal observations

Statistical reports Oral reports Written reports

What we measure?
What to measure is a set of criteria that determines what will the subordinates do. Objective criteria should be used instead of subjective criteria. However, if there are no objective criteria, a manager can use subjective measures such as subordinates satisfaction, turnover rate and absenteeism rate. Example : Juscos first line manager can measure the duration time taken to deliver goods. Step 2: Comparing The comparing step determines how far does the actual performance deviates from the standard. If the manager finds that the deviation exceed the acceptable range of variation, then they are significant and requires managers attention.

Step 3: Taking managerial action Managers can choose between three possible actions: they can do nothing; they can correct the actual performance; or they can revise the standards. Depending on the problem is, a manager could take different corrective actions. For instance, if unsatisfactory work is the reason, manager could correct it by training programs, and etc. Correct actual performance A manager who decides to correct actual performance has to make another decision: immediate corrective action or basic corrective action. Immediate corrective action corrects problem at once to get performance back on track. Basic corrective action looks at how and why performance has deviated and then proceeds to correct the root of the problem. Usually the managers will choose to use immediate corrective action as they do not have the time to find the root of the problem. Effective managers however will take time to find the root of the problem and correct the causes of variance. Revise the standard It is possible that the variance was a result on unrealistic standard; that is the goal may be too high or too low. Managers must be cautious about revising a standard downward as it is psychologically that an employee blame that the goal is too high when they fail to meet the goal. The standard may well be too high, and if this is the case it can result in a significant variation and may demotivate employees. If you believe that the standard is realistic, fair and achievable, hold your ground.

Primary methods of organizational control Definition:

The process of monitoring activities to ensure that they are being complied as planned and correcting a major difference (significant deviation). Purpose is to ensure that activities are completed in way that lead to the accomplishment of goals.

1) Feedforward/concurrent/feedback controls Managers can implement controls before an activity begins, during the time the activity is going on and after the activity has been completed. The first type is called feedforward control, the second is concurrent control and the last is feedback control.

Feedforward control A type of control that takes place before a work activity is done. This control is desirable because they allow managers to prevent problems, rather than correcting them later after the damage (poor-quality products, lost customers, lost revenue, and so on) has already done. However this control requires a lot time and needs accurate information that is often difficult to get. Examples: scheduled preventive maintenance programs on aircraft done by major airlines. These are designed to detect, and hoped to prevent structural damage that might lead to accident. Concurrent control A type of control that takes place while a work activity is in progress. Management can correct problems before they become too costly. The best known form of concurrent control is direct supervision which is known as management by walking around (MBWA). A term used to describe when a manager is out in the work area interacting directly with employees. For an example, principals of primary schools in Western Australia, they argue that school principle that use MBWA becomes very effective in their jobs. The principle moved through grounds and classes, speaking to teachers in their classrooms and greeting students by name. When a manager directly oversee the actions of employees, he can directly correct problems as they occur. Feedback control A type of control that takes place after a work activity is done. In feedback control the control takes place after the activity is done. Feedback controls do have two advantages over feedforward and concurrent control.

Benefits of feedback: a) Feedback provides managers with meaningful information on how effective their planning efforts were. Feedback that indicates little variance between standard and actual performance is evidence that the planning were generally on target. If deviation is significant, a manager use that information to formulate better plans to make them more effective. b) Feedback motivates employee to work harder. People especially who have high need of achievement want to know how well they have performed and feedback provides that information.

2) Financial controls Traditional financial measures that managers might employ include ratio analysis and budget analysis. Popular liquidity ratios such as current ratio are popular used by organization. Liquidity ratios measure an organizations ability to meet its current debt obligation. Activity ratios measure how efficiently the firm is using its assets. Finally, profitability ratios measures how efficiently and effectively the firm is using its assets to generate profits. Budgets are also planning and controlling tools. When a budget is formulated, it is important and how much resources should be allocated to each activity. Budgets are used for controlling, since they provide managers with quantitative standards against which to measure and compare resource consumption. By pointing our deviations between standard and actual consumption, they become control tools. If the deviation is significant enough to require action, the managers examine what has happened and try to uncover the reasons behind the deviations. 3) The balanced scorecard approach
A performance measurement tool that looks at four areas financial, customer, internal processes, and people/innovation/growth assets that contribute companys performances. According to this approach, managers should develop goals in each area and developed measures to determine if these goals are being met.

Although a balances scorecard makes sense, managers still tend to focus on areas that they believe drive their organizations success. Their scorecard reflects their strategies.

4) Information controls
Information control as a tool that helps managers to control other organization activities. Managers need the right information at the right time and in the right amount. Without information, they would find it difficult to measure, compare and take action as part of the controlling process. Management Information Systems or MIS is a system used to provide management with needed information on a regular basis. In theory, MIS can be manual or computer based. The term system in MIS implies order, arrangement and purpose. MIS focus on providing managers information, not merely data.

5) Benchmarking of best practices

Characteristic of an effective control system

These characteristics vary with contingency variable. Contingency Variables or factors. 1) Organization size Large Formal, extensive rules and regulations Small Informal, Management by walking around 2) Position and level High Many criteria Low Low criteria 3) Degree of decentralization Increase number of control Decrease number of control 4) Organizational culture Open and supportive Threatening Informal 5) Importance of activity High Elaborate Formal control Low Loose Informal control