31 Organizational Control

Dr. Ajay Sharma

33.1 Learning Objective

33.2 Introduction

33.3 Definition and Concept

33.4 Various Administrative Control

33.5 Control Procedure

33.6 Types of Control

33.7 Importance of Control

33.8 Control Techniques

33.9 Summary

Learning Objectives

After completing this module, you will be able to:

Understanding control system
To understand different techniques of control
To understand the control process

Introduction

Basically, organizational coordination and control is taking a systematic approach to figuring out if you’re doing what you wanted to be doing or not. It’s the part of planning after you’ve decided what you wanted to be doing. Below are some of the major approaches to organizational control and coordination.

Controls allow you to align the pieces with the big picture.Jason7825 – A 3D Jigsaw Puzzle – public domain.

New, more “organic” forms or organizations (self-organizing organizations, self-managed teams, network organizations, etc.) allow organizations to be more responsive and adaptable in today’s rapidly changing world. These forms also cultivate empowerment among employees, much more than the hierarchical, rigidly structured organizations of the past. Many people assert that as the nature of organizations has changed, so must the nature of management control. Some people go so far as to claim that management shouldn’t exercise any form of control whatsoever. They claim that management should exist to support employee’s efforts to be fully productive members of organizations and communities — therefore, any form of control is completely counterproductive to management and employees.

Some people even react strongly against the phrase “management control”. The word itself can have a negative connotation, e.g., it can sound dominating, coercive and heavy-handed. It seems that writers of management literature now prefer use of the term “coordinating” rather than “controlling”.

Definition

An effective organization is one where managers understand how to manage and control. The objective of control as a concept and process is to help motivate and direct employees in their roles. Understanding managerial control process and systems is essential for the long- term effectiveness of an organization. The term control has different connotations depending upon the context of the use of the term. In manufacturing it refers to a Device or mechanism installed or instituted to guide or regulates the activities or operation of an apparatus, machine, person, or system; in law it refers to controlling interest and in management as an authority to order and manage the workings and management of an entity.

Concept

Control is a management process to aim at achieving defined goals within an established timetable, and comprises of three components: (1) setting standards, (2) measuring actual performance, and (3) taking corrective action.

Regardless of the negative connotation of the word “control”, it must exist or there will be no organization at all. In its most basic form, an organization is two or more people working together to reach a goal. Whether an organization is highly bureaucratic or changing and self-organizing, the organization must exist for some reason, some purpose, some mission (implicit or explicit) — or it isn’t an organization at all. The organization must have some goal. Identifying this goal requires some form of planning, informal or formal. Reaching the goal means identifying some strategies, formal or informal. These strategies are agreed upon by members of the organization through some form of communication, formal or informal. Then members set about to act in accordance with what they agreed to do.

Effective management and leadership involve creative problem solving, motivating employees and making sure the organization accomplishes objectives and goals. There are five functions of management and leadership: planning, organizing, staffing, coordinating and controlling.

Controlling

Controlling is the fourth step of the management process. In this step, management develops measuring tools to use to determine whether organizational goals are being met. Management also compares data to measure for results and, if needed, takes corrective action. Controls can focus on issues before, during or after a process. The best way to understand the three different types of organizational controls is to think about the controls as before, during and after decisions made by managers.

The controlling function of management is useful for ensuring all other functions of the organization are in place and are operating successfully. Controlling involves establishing performance standards and monitoring the output of employees to ensure each employee’s performance meets those standards. The controlling process often leads to the identification of situations and problems that need to be addressed by creating new performance standards. The level of performance affects the success of all aspects of the organization.

Steps involved in controlling

Controlling consists of three steps, which include

(1) Establishing performance standards: This involves making decisions about the goals an organization wants to focus on during a period of time. These can be financial, customer satisfaction, production or employee performance-related goals.

(2) Comparing actual performance against standards: This involves creating measuring tools to collect data. The tool should be able to report on performance as it relates to the standards set, or ‘measures,’ developed in the first step of the controlling process. These tools can be a balance sheet, a sales report, data collected from a customer satisfaction survey or even an employee performance appraisal. Using the measuring tools created in the second step, managers are able to compare current performance and productivity to the standards set. A manager may want to compare sales performance from last year to this year by comparing the actual sales from the previous year to the sales of the current year. This comparison tells a manager whether the sales team is below, meeting or exceeding goals.

(3) Taking corrective action when necessary: This involves determining whether changes need to be made, what changes need to be made and devising a plan for making changes. Managers will use comparisons to determine what needs to be investigated. If sales are lower than expected, managers will look at various things. Perhaps the salespeople are not making as many client calls as they did last year. In this case, corrective action may be taken against the employees for non-performance. A manager may look at the work itself. Maybe there are too many clients and not enough staff. In this case, a manager may have to hire more staff. The price of the product or service may be too high, and it may affect demand. In this case, a manager may have to look at ways to add value to a product or service or lower prices.

Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units produced, number of defective products, or levels of quality or customer service.

The measurement of performance can be done in several ways, depending on the performance standards, including financial statements, sales reports, production results, customer satisfaction, and formal performance appraisals. Managers at all levels engage in the managerial function of controlling to some degree. The managerial function of controlling should not be confused with control in the behavioral or manipulative sense. This function does not imply that managers should attempt to control or to manipulate the personalities, values, attitudes, or emotions of their subordinates. Instead, this function of management concerns the manager’s role in taking necessary actions to ensure that the work-related activities of subordinates are consistent with and contributing toward the accomplishment of organizational and departmental objectives.

Effective controlling requires the existence of plans, since planning provides the necessary performance standards or objectives. Controlling also requires a clear understanding of where responsibility for deviations from standards lies. Two traditional control techniques are budget and performance audits. An audit involves an examination and verification of records and supporting documents. A budget audit provides information about where the organization is with respect to what was planned or budgeted for, whereas a performance audit might try to determine whether the figures reported are a reflection of actual performance. Although controlling is often thought of in terms of financial criteria, managers must also control production and operations processes, procedures for delivery of services, compliance with company policies, and many other activities within the organization.

Various Administrative Controls

Controls are exercised through various means by the superiors in an organization. Information are collected through various sources like documents, delegation reporting, evaluations at different functions and areas, performance appraisal in case of HR, Quality checks and controls adopted. Lets look at these in brief here:

Standardized Documents

Organizations often use standardized documents to ensure complete and consistent information. Documents include titles and dates to detect different versions of the document. Computers have revolutionized administrative controls through use of integrated management information systems, project management software, human resource information systems, office automation software, etc. Organizations typically require a wide range of reports, e.g., financial reports, status reports, project reports, etc. to monitor what’s being done, by when and how.

Delegation

Delegation is an approach to get things done, in conjunction with other employees. Delegation is often viewed as a major means of influence and therefore is categorized as an activity in leading (rather than controlling/coordinating). Delegation generally includes assigning responsibility to an employee to complete a task, granting the employee sufficient authority to gain the resources to do the task and letting the employee decide how that task will be carried out. Typically, the person assigning the task shares accountability with the employee for ensuring the task is completed.

Evaluations

Evaluation is carefully collecting and analyzing information in order to make decisions. There are many types of evaluations in organizations, for example, evaluation of marketing efforts, evaluation of employee performance, program evaluations, etc. Evaluations can focus on many aspects of an organization and its processes, for example, its goals, processes, outcomes, etc.

Performance Management (particularly observation and feedback phases) Performance management focuses on the performance of the total organization, including its processes, critical subsystems (departments, programs, projects, etc.) and employees. Most of us have some basic impression of employee performance management, including the role of performance reviews. Performance reviews provide an opportunity for supervisors and their employees to regularly communicate about goals, how well those goals should be met, how well the goals are being met and what must be done to continue to meet (or change) those goals.

Quality Control and Operations Management

The concept of quality control has received a great deal of attention over the past twenty years. Many people recognize phrases such as “do it right the first time, “zero defects”, “Total Quality Management”, etc. Very broadly, quality includes specifying a performance standard (often by benchmarking, or comparing to a well-accepted standard), monitoring and measuring results, comparing the results to the standard and then making adjusts as necessary. Recently, the concept of quality management has expanded to include organization-wide programs, such as Total Quality Management, ISO9000, Balanced Scorecard, etc.

Types of Control:

Control can focus on events before, during, or after a process. For example, a local automobile dealer can focus on activities before, during, or after sales of new cars. Such controls may be respectively called as Preventive, Detective, and Corrective.

Source: https://www.kullabs.com/classes/subjects/units/lessons/notes/note-detail/3964

On this basis the control may be: (Figure below)

(i) Feed forward Control

(ii) Concurrent Control

(iii) Feedback Control

1. Feed forward Control:

The objective of feed forward control or preliminary control is to anticipate the likely problems and to exercise control even before the activity has started or problem has occurred or been reported. It is future directed. This kind of control is very popular in airlines. They go in for preventive maintenance activities to detect and prevent structural damage, which may result in disaster. These controls are evident in the selection and hiring of new employees. It helps in taking action beforehand.

In case of feedback control, one relies on historical data, which will come after the activity has been performed. This means information is late and the rectification is not possible. One can make correction only for future activities. That means whatever wrong has been done is done, and it cannot be undone. Though, future-directed control is largely disregarded in practice, because managers have been excessively dependent on accounting and statistical data for the purpose of control. In the absence of any means of looking forward, reference to history is considered better than no reference at all.

However, the concept of feed forwarding has been applied now and then. One common way managers have practised it is through careful and repeated forecasts using the latest available information, comparing what is desired with the forecasts, and introducing program changes so that forecasts can be made more promising.

2. Concurrent Control:

Concurrent control monitors ongoing employee activity to ensure consistency with quality standards takes place while an activity is on or in progress. It involves the regulation of ongoing activities that are part of transformation process to ensure that they conform to organizational standards. The technique of direct supervision is the best-known form of concurrent control. Concurrent control is designed to ensure that employees’ activities produce the correct results and to correct the problems, if any, before they become costly. In case of computer typing, if the spelling is wrong or construction is incorrect, the programme immediately alerts the user. Many manufacturing operations include devices that measure whether the items being produced meet quality standards. Since concurrent control involves regulating ongoing tasks, it requires a complete understanding of the specific tasks involved and their relationship to the desired and product.

Concurrent control sometimes is called steering, screening or yes-no control, because it often involves checkpoints at which decisions are made about whether to continue progress, take corrective action, or stop work altogether on products or services.

3. Feedback Control:

The control takes place after the job is over. Corrective action is taken after analysing variances with the planned standards at the end of the activity. It is also known as ‘post action control’, because feedback control is exercised after the event has taken place. Such control is used when feed forward or concurrent is not possible or very costly; or when exact processes involved in performing a work is difficult to specify in advance. The twin advantages of feedback control are that meaningful information is received with regard to planning efforts, and feedback control enhances employee motivation.

Thus, control systems are the composite feed forward, concurrent, and feed-back controls. Control system can consist of a combination of any two or more controls. Any combination of these controls is used to accommodate various management control needs. Further controls can be grouped according to three general classifications namely (i) the nature of the information flow designed into the system (open- or closed-loop control), (ii) the kind of components included in the design (man or machine control systems), (iii) the relationship of control to the decision process (organizational or operational control).

Source: https://www.slideshare.net/nikitabuty/chap18-29286436

On the basis of designing Control Systems:

On the basis of designing control systems are:

1. Market Control

2. Clan Control

3. Bureaucratic Control

1. Market Control:

Market control means that creation of departments or allocation of resources is done on basis of market forces. Control is based upon the factors of competition i.e price and market share. Different divisions are converted into profit centres and their performance is evaluated by segmental top line (turnover), bottom line (profit) and the market share.

2. Clan Control:

Clan control is the part of organizational culture. It supports the work-related and performance measures and is in contrast to hierarchical mechanisms. These controls are designed based on shared values, culture, norms, tradition and beliefs etc of an organization. This type of control system are used where changes are very fast like technology organisations.

3. Bureaucratic Control:

As the name suggest it control focuses on authority, rule and regulations, procedures and policies. these are used in the big undertakings like public sector units in India which are governed with set rules and regulations. These organizations cannot be controlled if proper ruels and regulations are not followed. Such organizations are under bureaucratic control. For example, In a hospital no medicine can be used unless the prescription is there and it is recorded in the issue register, even if the patient may die in between.

On the basis of Levels:

On the basis of levels controls, can be categorised as Operational, Structural, Tactical, and Strategic.

1. Operational Control:

This control is used at low levels of management. i.e at operational level on day to day basis. It is used at process level for transforming the inputs (factors) into output(product/services).

2. Structural Control:

Structural control is exercised by top and middle management. It is used like whether the organization is overstaffed or span of control etc. Two important forms of structural control can be bureaucratic control and clan control.

3. Tactical Control:

Tactical control as the name implies deals with the department level objectives and thus it is exercised by middle management levels.

4. Strategic Control:

It is used by the top level management. Strategy decides the path for an organization. Thus these controls are used at strategic levels like functional levels to determine the success of organization, fulfillment of goals etc.

Importance of Controlling:

The significance of the controlling function in an organisation is as follows:

Source: https://www.kullabs.com/classes/subjects/units/lessons/notes/note-detail/4037

1. Accomplishing Organisational Goals:

Controlling helps in comparing the actual performance with the predetermined standards, finding out deviation and taking corrective measures to ensure that the activities are performed according to plans. Thus, it helps in achieving organisational goals.

2. Judging Accuracy of Standards:

An efficient control system helps in judging the accuracy of standards. It further helps in reviewing & revising the standards according to the changes in the organisation and the environment.

3. Making Efficient Use of Resources:

Controlling checks the working of employees at each and every stage of operations. Hence, it ensures effective and efficient use of all resources in an organisation with minimum wastage or spoilage.

4. Improving Employee Motivation:

Employees know the standards against which their performance will be judged. Systematic evaluation of performance and consequent rewards in the form of increment, bonus, promotion etc. motivate the employees to put in their best efforts.

5. Ensuring Order and Discipline:

Controlling ensures a close check on the activities of the employees. Hence, it helps in reducing the dishonest behaviour of the employees and in creating order and discipline in an organization.

6. Facilitating Coordination in Action:

Controlling helps in providing a common direction to the all the activities of different departments and efforts of individuals for attaining the organizational objectives.

Thus, controlling is the process through which the activities are not only turned in to producing better results, but are also improved in a way to continue success while eliminating obstacles that get in way of business progress. In addition, controlling function has a great application during the times that demand immediate attention or action. If the timely action is not taken, there might be considerable loss to a business. Hence, in such times, controlling function is of great use to offer timely help and assistance to the key individuals of a business. Control is not just limited to determine whether or not the plans are being adhered to, but it also leads to identify the reasons of deviations and to take corrective actions accordingly. However, this function should not be taken in isolation while there is a need to understand its functionality properly. It is aimed at improving effectiveness, efficiency of a business entity and achieving better results. It is therefore to be used to support the organization in achieving its objectives – not otherwise. It must be noted that an effective control system can bring better results while it can lead a business organization to succeed, survive and attain sustainable development.

Characteristics of controlling function

The following are the basic characteristics of controlling function.

Controlling function is a management process
Controlling is closely linked with planning. Control is said to be checking performance as per what has been planned. So planning precedes controlling and sets the standards and targets of performance.
Controlling is a continuous process. It is an ongoing and dynamic function of management. It involves a continuous review of performance and is not a one-time exercise. The period of control normally depends upon the nature of work, the amount of work and the policies of management.
Controlling is all pervasive. It is embedded in each level of organizational hierarchy. Control is exercised at all the levels of management, and is done in every functional area and at each unit or department.
Controlling is a tool for achieving organizational activities. It is an action-oriented process. It points out errors in the execution process. The very purpose of control is defeated if corrective action is not taken for improvement of performance or the revision of plans.
Controlling is forward looking. Control is futuristic in nature. It measures current performance and provides guidelines for the corrective action. This ensures future performance as per plans.

Summary

In this study we studied the introduction, definition and concepts of organizational control, various administrative controls, control procedure, types of control and important control techniques, on the basis of Market Control, Clan Control and Bureaucratic Control based on the levels and on the basis of responsibility. This can be used to develop an organization in the competitive environment.

you can view video on Organizational Control

References

Gibson, C. B. & Birkinshaw, J. (2004): The antecedents, consequences, and mediating role of organizational ambidexterity. Academy of Management Journal, 47(2), 209-226.
Lubatkin, M. H.; Simsek, Z.; Ling, Y. & Veiga, J. F. (2006): Ambidexterity and performance in small-to medium-sized firms: The pivotal role of top management team behavioral integration . Journal of Management 32(5), 646-672.
Malmi, T., & Brown, D. A. (2008): Management control system as package – Opportunities, challenges and research directions. Management Accounting Research 19(4), 287-300.
Merchant, K. A. & Van der Stede, W. A. (2007): Management control systems: Performance measurement, evaluation and incentives, Essex: Pearson Education Limited, 2007.
http://study.com/academy/lesson/organizational-controls-feedforward-concurrent-feedback.html
http://www.strategic-control.24xls.com/en106
Merchant, K. A. & Van der Stede, W. A. (2007): Management control systems: Performance measurement, evaluation and incentives, Essex: Pearson Education Limited, 2007.
Kootnz & O’Donnell, Principles of Management.
J.S. Chandan, Management Concepts and Strategies.
Stephen P Robbins, David A Decanzo, Fundamentals of Management, 3rd Edition, Pearson Education, 2002.
David, F.R. (2009). Strategic Management: Concepts and Cases. 12th ed. FT Prentice Hall.