ABUS002-4-1 MBUS- MANAGING BUSINESS Diploma –Level 1 ICT(ITR)/ICTSE/BIT/ICT(D)I/BSA/FIN/ACC-RHH

Chapter 10: Control

Define control.

According to Robbin and Coutler (1996), control is a process to ensure activities are
implemented as planned and activities that are considered to be incorrect are corrected. As a
whole, managerial control is processes whereby managers ensure that actual activities are
conducted in line with the planned activities and take corrective actions to correct any mistake
that occur in order to achieve organizational goals.

Importance of Control

1. Strong and Smith stated that good management requires an effective control system. The
combination of well-planned objectives, a strong organisation, effective instructions and
motivation will not bring success to an organisation if a suitable control system is not practiced
by the organisation.

2. There are four important factors related to the importance of control in an organisation as
follows:

(a) Internal and external changes in an organisation

i. An organisation tends to change due to internal and external changes in the organisation.

ii. Examples of internal changes in an organisation are changes in rules and the organisation
structure.

iii. Examples of external changes in an organisation are the increase in the production and
labor costs, changes in consumers’ taste, and the introduction of new products in the
market.

(b) Organisation’s size and decentralization

i. The organisation’s growth in size will increase the number of employees and jobs. The
managers’ duty to supervise the increasing number of employees will become difficult.
Thus, control is needed to ensure that all activities run smoothly and there is no
overlapping of tasks.

ii. Decentralisation in an organisation also requires control to be performed in order to avoid

the abuse of power.

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(c) Mistakes

Employees can make mistakes. Through control, managers can correct these mistakes before it
becomes serious.

(d) Allocation of power and responsibilities

i. Although managers allocate their power and responsibilities to employees, they

are still responsible for each task performed by these employees.

ii. Managers should monitor the duties performed by each employee in order to
ensure the duties are completed in accordance with established organizational
goals.

Control Process

1. The control process can be divided into the following four steps, as shown in Figure 1

Set the standards

Measure the actual performance

Compare the actual performance with the

standards

Take corrective action

Figure 1 The Control Process

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(a) Set the standards

i. This step involves the formation of standards for each management activity such as sales
and production target, attendance of employees and safety records.

ii. Standards are the benchmark for an aspect that requires control. Managers must know the
standards which have been established.

iii. The factors that need to be considered in setting standards are:

 Standards must not be too high or too low;

 Standards must be of quality;

 Standards must be clear and be accepted by every employee involved in achieving

the standards.

iv. Within organisation’s overall strategic planning, managers define specific goals for
organizational departments in terms of operations that include a set standard of performance
against which to compare the organizational activities or output. For example, a standard of
performance could include ‘reducing the reject rate 50% to 5%’,’ increasing the company’s
return on investment to 20%’ or ‘reducing the number of accidents to one per 10,0000 workers’.

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v. Managers should carefully assess the standard that they will measure and how they will define
it. In particular, the time when the organisation will reward employees for the achievement of
standards. These standards should reflect activities that contribute to the organisation’s overall
strategy in a significant way. For example, cash reward of RM3000 to the individual or group
members who outperform in their productivity when compared to the organisation standard.
Standards should be defined precisely so that managers and workers can determine whether
activities are on target. In addition, the people responsible for achieving standard must be able to
understand them.

b) Measure the actual performance

i. Just like control, the measurement of performance is a repetitive process. For example, a
teacher will evaluate his student’s performance through quizzes, assignments and projects from
the beginning until the end of the semester.

ii. Likewise, managers must measure their employees’ performance continuously in order to
ensure that no mistakes occur while activities are being implemented.

iii. Most organisations prepare formal reports of quantitative performance measurements that
manager’s review daily, weekly or monthly. These measurements should be related to the
standards set in the first step of the control process. For example, is sales growth is a target, the
organisation should have a means of gathering and reporting sales data. Is the organisation has
identified appropriate measurements, regular review of these reports helps managers be aware
whether the organisation is doing what it should be doing.

c) Compare actual performance with the standards

i. After the actual performance is evaluated, managers need to compare the actual performance
with the standards to identify whether the actual performance has met the standards.

ii. If the standards are met, the activities were conducted as planned. On the other hand, if the
standards are not met, mistakes might have occurred and corrective action must be taken
promptly to amend those mistakes.

iii. The third step in the control process is comparing actual activities with performance
standards. When managers work on the computer or examine workers’ productivity, they identify
whether actual performance meets, exceeds or falls short of standards.

iv. Many companies focus on sales revenue. For example, in companies such as Tesco, Jaya
Jusco and Mc Donald’s, daily and weekly data are reported to central office where senior
managers look at sales trends and results and investigate those that are not meeting expectations.
Many companies now have their electronic cash register hard-wired to computers and to
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aggregate sales data, so that managers can see in absolute real time how sales revenue is
progressing and make decisions such as scheduling, reordering from suppliers, pricing and
promotion decisions with up to date factual information. When performance deviates from a
standard, managers must interpret the deviation.

d) Take corrective action

i. If the standards are not met, managers must identify the cause of the situation.

ii. Managers can overcome this problem either by re-evaluating the standards (high standards
will be difficult to achieve) or taking corrective action, for example repairing faulty machines or
providing training for unskilled employees.

iii. Sometimes, corrective action involves changes to one or several activities in the
organisations. When performance deviates from standards, managers must determine what
changes, if any, are necessary. Managers exercise their formal authority to make necessary
changes. Managers may encourage employees to work harder, redesign the production process or
fire undisciplined or ineffective employees.

iv. Managers should know when and how to take corrective action. These require good judgment
and even experienced managers make mistakes. In some cases managers may take corrective
action to change performance standards. They may realize that standards are too high or too low
if departments continually fail to meet or routinely exceed standards. If contingency factors that
influence organizational performance change, performance standards may need to be altered to
make them realistic and provide continued motivations for employees.

v. All organisations with well-designed control systems involve the use of feedback to determine
whether performance meets established standards. Managers set up control systems that consist
of the four key steps as illustrated in figure 1 (above).

TYPES OF CONTROL

1. Control can focus on events before, during or after a process. For example, a local car dealer
can focus on activities before, during or after the sales of new cars. Careful inspection of new
cars and cautious selection of sales employees are ways to ensure high quality of profitable sales
even before those sales take place. Monitoring the way salespeople act with consumers would be
considered control during the sales task. Counting the number of new cars sold during the month
or telephoning buyers about their satisfaction with sales transactions would be control after sales
have occurred.

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INPUT PROCESS OUTPUT

Feedforward control Concurrent control solves Feedback control solves

anticipates problem problems as they happen problems after they occur

(Before activity starts) (During activity) (After activity)

Examples Examples Examples

*Pre- employment  Total quality *Analyse sales

psychology testing management *Final quality inspection

*Inspect raw materials  Employee of products and services

quality performance *Survey customer’s

*Select qualified job  Organisational satisfaction

applications resources

Figure 2 Organisational Control Focus

Feedforward Control

1. Feedforward control is performed before an activity starts.

2. Managers who conduct feedforward control are usually involved in making policies,
procedures and rules to eliminate any undesired behaviors.

3. The objective of feedforward control is to avoid mistakes that occur before crude oil refinery
provides training for new employees. Although this training increases costs, it can increase the

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productivity level of new employees and reduce the number of industrial accidents, particularly
in oil field refinery.

4. The advantage of feedforward control is that the management can avoid any problems or
mistakes from occurring. Sometimes called preliminary control or preventive control, it focuses
on human, material and financial resources that flow into the organisation. Its purpose is to
ensure that input quality is high enough to prevent problems when the organisation performs its
tasks.

5. The disadvantage of this type of control is, not only it requires accurate information but also
the right time. As it might be difficult for managers to implements feedforward control due to
difficulties in obtaining accurate information, other types of control might have to be used.
Feedforward controls are evident in the selection and hiring of new employees. Organisations
attempt to improve the likelihood that employees will perform up to standards by identifying the
necessary skills and using tests and other screening devices to hire people who have those skills.

6. Many organisations also conduct drug screening to ensure that job candidates or employees do
not impair their ability to work safely and effectively. Another example is a requirement that
professional football, badminton and hockey players pass a physical exam before their contracts
are validated. All of these kinds of testing are feedforward controls because they are intended to
prevent deviations from acceptable performance.

Concurrent Control

1. Concurrent or steering control is performed during the implementation of a job or activity.

2. Since control is conducted while the activity is being implemented, management can take
action promptly to correct the mistakes that occur before it becomes serious. This can reduce the
cost of taking corrective action.

3. Concurrent control is not only conducted on employees’ performance, but it is also conducted
on human and non-human resources such as equipment, machinery and the office layout. For
example, the production manager reprimands and employee who in the manager’s opinion did
not concentrate on his work. This can affect the smoothness and safety of operations in the
organisation.

4. Even though concurrent control can slow down an activity to the minimum level, however this
type of control can avoid bigger problems from occurring.

5. Concurrent control is more effective if managers obtain accurate information regarding

environmental changes and the development of desired organizational goals at the right time.

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6. Concurrent control enables managers to grab unexpected opportunities.

7. Although the actual performance might deviate from the performance standards or original
plans, it is not too late for managers to take corrective action. Managers can allocate
organizational resources to sectors that will bring profit to the organisation.

8. Many manufacturing operations include devices that measure whether the items being
produced meet quality standards. Employees monitor the measurements and when they see that
standards are not met in some areas, they make a correction themselves or signal the appropriates
person that a problem is occurring. Technology advancements are adding to the possibilities for
concurrent control in services as well. For example, nearly three-quarters of Malaysian
companies use computers to help plan their routes for efficiency.

93 Other concurrent controls involve the way organisations influence employees. An

organisation’s cultural norms and values influence employee behavior, as do the norms of an
employee’s peers or work group. An organisation that adopts a philosophy of total quality
management establishes the norm that employees will seek ways to continuously improve the
organisation’s activities. Employees who accept these norms will look for ways to improve
quality thus contributing to the standard of continuous improvement in overall organizational
goals.

Feedback Control

1. The objective of feedback control is to measure the results of an action.

2. Through feedback control, any source of weaknesses in plans or standards can be identified.

3. Sometimes called post-action or output control, feedback control focuses on the organisation’s
outputs – in particular, the quality on an end-product or service. An example of feedback control
in a manufacturing department is the intensive final inspection of the assembly plant. At most
universities, students provide feedback information on the value and usefulness of every subject
they take. Universities measure students’ perceived quality of lecturers and tutors, the pass and
failure rates, the use of multimedia technology and other aspects of teaching and learning
effectiveness. The university authorities also measure research inputs and outputs of lecturers
and use the information to adjust policies, guide decisions and allocate resources. Similarly,
when students get marks or tutors’ comments for early assignments during a semester they use
this feedback to adjust their efforts in the future.

4. Besides producing high quality products and services, businesses need to earn a profit and
even non-profit organisations need to operate efficiently in order to carry out their mission.
Therefore many feedback controls focus on financial measurements.

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5. This control is also used as the basis for giving rewards or motivating employees. For
example, employees who successfully achieve the set performance standards will be given
bonuses.

6. The speed of information flows is an important factor in ensuring an effective feedback

control. If weaknesses are detected early, corrective action can be taken promptly.

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