SAINT MICHAEL’S COLLEGE OF LAGUNA

OLD NATIONAL ROAD, PLATERO, CITY OF BINAN, LAGUNA

Lesson 7: The Controlling Function

Objectives:

At the end of the lesson, the students are able to

1. Apply the concept and nature of different control methods and techniques in accounting
and marketing

Definition and Nature of Management Control

Management control is the process of providing a historical record of what happened to
the organization as a whole while at the same time identifying the reasons why it happened.
Management control provides data that enable managers to take corrective steps if necessary. It
also aims to find out if there are deviations between actual performance and standard
performance and so that the necessary steps to prevent such deviations can e taken in the future.
Controlling as a management function is the process of determining whether
organizational goals and objectives have been achieved (or if they were not, determine the
reasons why? And determining what steps should be taken to achieve them in a better way in the
future. Controlling completes the five-cycle process of management.
Importance of Controlling
Controlling is important to organizations for the following reasons:
1. Proper implementation of management control helps organizations achieve their goals in
the most effective and efficient manner possible.
2. Controlling investigates deviations between actually and planned performance and
determines the reasons why.
3. Effective control systems and measures minimize the effects of negative variances and
differences from those initially planned.
4. Through controlling, corrective actions and measures may be put in place to make
processes more effective and efficient.
5. Controlling also evaluates past activities.

Characteristics of Managerial Control

Managerial control has certain features such as the following:
1. Control is a function of managers at all levels in the organization.
2. Control leads to the evaluation of past activities and corrective actions are taken
necessary.
3. Control is forward-looking and acts as a preventive measure to minimize deviations
encountered in the past.
4. Control involves setting standards, measuring actual performance, comparing actual
performance with planned performance, and investigating variations between actual and
planned performance.
5. Control implies taking corrective measures.
6. Control can be exercised only with reference to the basis of plans.
7. Control aims at correcting a situation rather than reprimanding persons.
 8. Information or feedback is the guide to control.
9. Control involves a continuous review of standards of performance, which makes it a
dynamic and flexible process.
10. Control is a continuous activity and involves a constant analysis of validity of standards,
policies, and procedures.
Steps in the Control Process
There are four basic steps in control process which are as follows:
1. Establish Standards. For control to be effective, objectives and targets have to be
determined first. Typical examples of targets, objectives, or standards are:
a. Sales targets- expressed in sales volume (quantity) or monetary amounts
b. Production targets- expressed in production volume (quantity) or quality
c. Worker attendance- expressed in terms of rate of absences
d. Safety records- expressed in number of incidents reported
e. Supplies used- expressed in quantity or monetary amounts used
When setting standards, organizations should consider the following points:
o Standards must be clear, intelligible, and realistic.
o Standards should be specific, accurate, precise, acceptable, and workable.
o Standards should serve as benchmarks; therefore, they should neither be too
high nor too low, but rather workable and attainable.
o Standards should be flexible based on changing circumstances.
2. Measure actual performance. It is importance to measure actual performance to
determine whether predetermined targets were achieved or if not, whether adjustments
could be made. This measurement of performance can be done by personal observation,
reports, charts, or statements.
3. Comparing actual performance with standards. Once actual performance has been
determined, it is now compared with standards that were established. Through this,
managers have to determine whether there are variations and what caused these
variations.
4. Taking necessary action. After comparing actual performance with standards and
deviations, managers should now take action to correct these deviations.
Characteristics of Effective Controls
Effective control systems in organizations have certain characteristic features which are
as follows:
1. Suitable. Effective control systems are capable of informing managers about possible
deviations and provide a feedback system for corrective action.
2. Timely and forward looking. Effective control systems are capable of informing
managers about possible deviations and provide a feedback system for corrective
action.
3. Objective and comprehensive. Control systems should be understandable and al-
encompassing in the organization.
4. Flexible. Control systems should be capable of adjustment to suit the needs of the
changing environment and circumstances.
5. Economical. The benefits of installing a control system must exceed the costs if doing
so.
6. Acceptable to organization members. The system should be acceptable to managers
and members at all levels in the organization.
7. Motivate people to high performance. An effective control system is one that can
motivate to strive for high performance and productivity.
Types of Control
Organization control systems can be classified into the following:
1. Past-oriented controls. These are also known as post-action controls. They measure
results after a process is conducted and examine what has happened in a particular period
in the past. These controls can be used to plan future performance.
 2. Future-oriented controls. These are also known as steering controls. They are designed
to measure results during the process so that action can be taken before the job is done
or the period is over.
3. Feedforward controls. These are controls that anticipate problems and prevent their
occurrence.
4. Concurrent controls. These are controls used to detect variances when operations are
already ongoing.
5. Feedback controls. These are controls used for purposes of evaluating the results of a
completed activity and aims at determining corrective actions to improve future
performance.
Scope of Control
1. Control over policies. This deals with how organizations policies are implemented. In many
organizations, policies are controlled through the use of policy manuals.
2. Control over organization. This is accomplished through the development of organizational
charts and organizational manuals that specify lines of hierarchy, authority, and
responsibility.
3. Control over personnel. This ensures that all employees working at different levels in the
organization are performing their assigned duties well.
4. Control over wages and salaries. This is done through job evaluation and wage and salary
analysis.
5. Control over costs. This exercised by the cost accountant in the form of budgetary controls.
6. Control over methods. This is accomplished by conducting analysis and evaluation of the
activities performed by each department.
7. Control over capital expenditures. This is accomplished through a system of evaluating
capital projects and ranking them according to priority.
8. Control over research and development. These are usually highly technical in nature, so
no direct control is possible over them. Indirect control, however, can be exercised by
having training programs for research staff of organizations.
9. Control over external relations. This is done through the public relations department of an
organization.
10. Overall control. This is affected through a master budget for the entire organization that
involves and encompasses all departments of the organization through the supervision of
top management.
References:
Altarejos, A.; et.al. (2016). Organization and Management.
Quezon City: Vibal Group, Inc. Quezon City

Ng, MF. (2019). Organization and Management.

Mandaluyong City: Anvil Publishing, Inc.