Controlling function of management can be defined as comparison of actual performance with the planned performance. If there is any difference or deviation then finding the reasons for such difference and taking corrective measures or action to stop those reasons so that future thee is match between actual and planned performance. The meaning of controlling makes it clear that controlling function is undertaken for right and timely implementation of plans.
Steps Involved in the Management Control Process
Management control process is the continuous and ongoing dynamic process of monitoring performance and taking action to ensure desired results.
1. Setting Up of (target) Standards
Standards mean target or the yardstick against which the actual performance is measured. The standards must be achievable, high or very high standards which cannot be achieved are of no use. Standards must be set up keeping in mind the resources of the organization and as far as possible standards must be set up in numerical or measurable terms. Sometimes it is not possible to express the standards in numerical terms. For example, setting up of quality standards or standards for managerial work etc. The standards must specify the time limit within which they have to be achieved and as far as possible the standards must be set up for short term. If long term standards are set up they must be divided into short term. With short term targets or standards the errors can be detected early and timely actions can be taken. The standards must be revised from time to timely actions can be taken. The standards must be revised from time to time keeping in mind the changes of business environments.
2. Measuring of Performance
After setting up standards of the performance of the employees is measured by evaluating the actual work done by the employees. When the performance can be measured numerically then it is very convenient to measure the performance. While measuring the performance the quantitative as well as qualitative aspect of performance is kept in mind. Sometimes employees achieve the quantitative standards by ignoring qualitative standards. That is why while measuring the performance quality standards are also measured. Certain quality parameters are fixed to measure the quality standard when numbers of rejection or sales return increases. It indicates low standard of quality.
Generally the performance of managers is measured by looking at the overall efficiency level of the organization. The performance of research and development department is measured by change in technology and updating of production department. The performance of financial department is measured by checking the solvency and liquidity ratios etc. the performance must be measured periodically in short period of time.
3. Compare Performance against a Standard
After measuring the performance the manager compares the actual performance with the planned performance and standard. If there is match in both then the controlling function ends there only. But if there is mismatch or deviation then the manager tries to find out the extent of deviation. If the deviation is minor then it should be ignored. But if the deviation is more than timely action must be taken.
4. Analyzing Deviations
All deviations need not be brought to the notice of top management. A range of deviations should be established and only cases beyond this range should be brought to the knowledge of top level management. They must divide the deviations in two categories deviations which need to be attended urgently in one category and minor or insignificant decisions in other category. These two categories must be controlled by following ways:
- Critical point control. It means keeping focus on some key areas (KRAs) and if there is any deviation in these key areas, and then it must be attended urgently. Key areas are those which have impact on whole organization. For example, if there is increase in production cost by 2$, per unit and there is increase in postal cost by 10$, then more focus should be to find out reasons for increase in cost of production as it will affect the profits and future revenue of organization whereas postal cost is incurred rarely and managers have no control over postal cost.
- Management by exception. It means a manager who tries to control every thing may end up controlling nothing. The deviations which are beyond the specific range should only be handled by managers and minute or minor deviations can be ignored. Manager should not waste his time and energy in finding solutions for minor deviations rather he should concentrate on removing deviations of high degree. For example, if production cost increases by 2$, it can be ignored but if it increase more than 2$, then managers must try to find out the reason for such increase after identifying the reasons for deviations which need immediate attention. These deviations and reasons must be brought to the knowledge of top level management for critical evaluation whereas the increase less than 2$ can be handled at supervisory level or can be ignored also for some time.
The causes for deviations can be many: for example, fault in machinery, inefficient staff, shortage of resources, over or understating of standards. It is very essential to find out the exact and accurate cause of deviation.
5. Taking Corrective Measures
On comparing the actual performance with the planned performance, the manager will come to know about the deviations between the plan and actual performance. They the next step is to know the reasons for such deviations and trying to remove deviations in future. The manager takes measures to bring back everything on the track i.e., according to plan. Taking corrective measures may involve.
- Let the situation remain same if the deviations are minor.
- Redesign or re-frame the plans or strategies if these are overstated or not matching with the present day business environment.
- Taking corrective measures to improve the performance so that in future it matches with the plan.
Generally the managers take measures to improve the performance such as sending the employees for training if the deviation is due to inefficient performance, getting the machine repaired if delay in performance is due to fault in the machinery, making the supervisors more responsive. If delay is due to carelessness and laziness of the employees, sometimes the managers have to see the standards and targets again if standards are not realistic and achievable. This revision of standards is called downward revisions because standards are reduced to make them realistic and achievable. Sometimes the performance is higher than the set standards; in that case upward revision of the plan is done and plans are set at high rote so that they match with the actual performance. The manager must take the corrective measure only by finding the root cause of the deviation and try to remove that cause.
6. Feedback in Controlling
The controlling function does not end by taking corrective action as it is a continuous process. After suggesting the corrective measure a feedback report is prepared. Feedback refers to list of reasons for deviations of plans or for inefficiency in overall working of organization; along with reasons the corrective measures are also specified in the feedback report and feedback acts as a base to establish the standard for next year and controlling process again starts from first step.