CONTROLLING

CONTROL IN ORGANIZATIONS
It’s a manager who sets targets and objectives and measures them to find out how far they have
been achieved. It’s meant to find out whether there are deviations so that a corrective action is
taken to ensure everything is on course. Organizations need controls in order to determine if their
goals are being met and to take corrective action if necessary. Control is the regulation of
organizational activities so that some targeted element of performance remains within acceptable
limits. Organizations establish controls in a number of different areas and at different levels. The
responsibility for managing control is extensive.
Objectives of Controlling.
The following are the objectives that any controlling effort is meant to achieve:
i) To keep checks on the expenses both direct and indirect expenses
ii) To find out whether the objectives set are achievable
iii) To ensure the company moves to the highest level possible
iv) To find out what is happening, why and by whom it happens
v) To ensure all activities are carried out according to plan
Characteristics of Controlling
1. It is forward looking
It seeks to correct the future actions happening in an organization. It is based on experience of
control which guides the future actions of a manager
2. It is a continuous process
It’s where the organization continually evaluates its systems in terms of targets, objectives, goals
and so forth to find out if everything is fine
3. It is a management function
It is only carried out by managers because it involves taking corrective action which includes,
mobilizing for additional resources, employment of new staff, changes in the Company’s
operations. These are issues that cannot be delegated
6.3.4 It is carried out at all level
Manager’s irrespective of their level carry out controlling. This is so because they have targets
and objectives that they are pursuing. They often ensure operations in their areas of jurisdiction
is smoothly running according to plan,
Steps to be followed when Controlling
i) Establishment of the Standards
This is a basis of measurement of performance which can be in quantitative and non quantitative
terms. A standard is a benchmark on which the results are measured. There are many standards
that can be made including:
 Cost standards-this ensures that costs anticipated are not surpassed
 Revenue standards-this ensures that the expected revenue from an activity is indeed
realized if performance is to be rated as good
 Physical standards-these are countable like the number of working hours, units of
production per machine etc
 Capital standards-this includes, rate of return on capital invested
 Intangible standards-such as competency of workers and customer care success

ii) Measurement of Performance

It is the measurement of the actual performance in order to know what has happened or what is
likely to happen. The measurement can be done through observation of the worker’s
performance. It can also be in terms of reports, charts and any management summaries. Its
purpose is finding out if there is anything amiss at the earliest time possible
iii) Comparison of the Actual Performance with the Standard
This is finding out what was set out at the beginning of the controlling period in terms of targets
and objectives and what has been realized at the end of the period.
iv) Finding Out for Deviations
While comparing the actual and the standard performance, any deviations are identified.
A positive deviation means the targets were surpassed and the management requires identifying
the contributing factors so that everything can be maintained. A negative deviation means that
the targets set out were not realized and therefore a corrective action must be under taken in
order to put everything back on course. This could include transfers of workers to other
departments, re-doing the plans and increasing the funding of the projects.

Importance of Controlling
i) It is a basis for the future action because the controlling is based on what has happened in the
past
ii) It helps in facilitating of coordination because everything is set out clearly in the procedures
iii) It helps to reduce the possibility of the results not conforming to the set standards
iv) It simplifies the supervision for the managers
v) It is a form of delegation within the organization
vi) It provides an organization with ways to adapting to environmental change by enabling it to
anticipate, monitor, and respond to changing environmental conditions.
vii) It also provides ways to enable the organization limit the accumulation of error, cope with
organizational complexity and minimize costs
Areas of control
The four basic organizational resources usually define the areas of control.
1. Physical resources: Control includes inventory management, quality control and
equipment control.
2. Human resources: Control includes selection and placement, training and development,
performance appraisal and compensation.
3. Information resources: Control includes sales/marketing forecasting, environmental
analysis, public relations, production scheduling and economic forecasting.
4. Financial resources: Control involves managing the organizations debt, cash flow and
receivables/payables. Control of financial resources may be the most important control of
all.
Control Levels
Control is practiced at many levels in the organization and the ultimate responsibility for control
rests with all managers throughout an organization.
Types of Controls
1. Operations Control.
This is control of the processes an organization uses to transform resources into products or
services.
i) Preliminary Control. Preliminary control, also known as steering control or feed
forward control, focuses on the resources that the organization brings in from the
environment. It attempts to monitor the quality or quantity of these resources before they
enter the organization.
ii) Screening Control. Screening control, also known as yes/no control or concurrent
control, focuses on meeting standards for product or service quality or quantity during the
transformation process. Screening control relies on feedback processes. For example,
when quality checks are used to provide feedback to workers manufacturing a product,
the workers know what, if any, corrective actions to take.
iii) Post action Control. Post action control, also known as feedback control, focuses on the
outputs of the organization after the transformation process is complete. Although post
action control used alone may not be as effective as preliminary or screening control, it
 can provide management with information for future planning. Post action control also
may be used as a basis for rewarding employees.
2. Financial Control.
The control of financial resources as they flow into the organization, are held by the
organization, or flow out of the organization is known as financial control.
i) Budgetary Control. A budget is a plan expressed in numerical terms: dollars, units of
output, time, or any other quantifiable factor. Budgets provide a method for measuring
performance across different units within the organization. Budgets have four primary
purposes: helping managers coordinate resources and projects, helping define the
established control standards, providing clear guidelines about the organization's
resources and expectations, and enabling organizations to evaluate the performance of
managers and units.
ii) Financial statements: A profile of some aspect of an organization's financial
circumstances is a financial statement. The two most commonly used financial statements
are the balance sheet and the income statement. The balance sheet shows a snapshot
profile of the organization's financial position. The income statement summarizes
financial performance over a period of time.
iii) Ratio analysis: Financial ratios compare different elements of a balance sheet or income
statement to one another. Ratio analysis is the calculation of one or more financial ratios
to assess some aspect of the financial health of an organization. Five commonly used
financial ratios are liquidity, debt, return, coverage, and operating.
iv) Financial audits: Audits are independent appraisals of an organization's accounting,
financial, and administrative procedures. An external audit is a financial appraisal
conducted by experts who are not employees of the organization. An internal audit is an
appraisal conducted by employees of the organization. The objective of these audits is to
verify the accuracy of financial and account procedures. Internal audits also assess these
procedures for efficiency and appropriateness.
3. Structural Control.
Structural control focuses on how well an organization's structural elements serve their intended
purpose. The most common form of structural control is the bureaucratic and the clan controls.
Organizations characterized by these opposite approaches differ structurally in terms of foals,
degree of formality, performance focus, organization design, reward system, and level of
employee participation.
i) Bureaucratic Control. Bureaucratic control is characterized by formal and mechanistic
structural arrangements. Organizations that use it tend to rely on strict rules and to have a
rigid hierarchy.
ii) Clan Control. Clan control is characterized by informal and organic structural
arrangements. The goal of clan control is gaining employee commitment.
4. Strategic Control.
Strategic control focuses on how effectively the organization's strategies result in the attainment
of goals. The assessment of strategy requires the organization to integrate strategy and control.
Integrating Strategy and Control. Strategic control generally concentrates on organization
structure, leadership, technology, human resources, and information and operations control
systems. They often are seen as areas in which a strategy is or is not being effectively
implemented. Strategic control focuses on the extent to which implemented strategy achieves the
organization's strategic goals. If goals are not being attained, the firm will find it necessary to
make changes in one or more areas

Problems Associated with Control

i) Over control: Over control becomes especially problematic when the control directly
affects employee’s behavior. Trouble arise when employee perceive these attempts to
meet their behavior as being unreasonable.
ii) Inappropriate focus: The control system may be too narrow, or it may follow too much
on quantifiable variables and leave no room for analysis or interpretation.
iii) Rewards or inefficiency: Imagine two operating departments that are approaching the
end of the fiscal year. Department expect to have 5 million of its budgets left over;
department is already 3 million in the red. As a result, department is likely to have its
budget cut for the next year.
iv) Too much accountability: Effective controls allow managers to determine whether or
not employees successfully discharge their responsibilities. If standards are properly set
and performance is accurately measured, manager know when problem arise and which
department and individual