University of Sadat City

Faculty of Commerce

Fundamentals of Controlling
Prof. Dr. Wageeh A. Nafei
University of Sadat City, Menoufia, Egypt
University of Sadat City
Faculty of Commerce

Chapter Five
Fundamentals of Controlling
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Fundamentals of Controlling
After reading and studying this chapter, you should be
able to know:

❑Defining Control
❑Defining Controlling
❑Types of Control
❑The Controller and Control
❑Power and Control
❑Performing the Control Function
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Defining Control
Stated simply, control is making something happen the
way it was planned to happen. As implied in this
definition, planning and control are virtually inseparable.
In fact, the two have been called the Siamese twins of
management. According to Robert L. Dewelt:
The importance of the planning process is quite obvious.
Unless we have a soundly charted course of action, we will
never quite know what actions are necessary to meet our
objectives. We need a map to identify the timing and scope
of all intended actions. This map is provided through the
planning process.
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But simply making a map is not enough. If we don't

follow it or if we make a wrong turn along the way,
chances are we will never achieve the desired results. A
plan is only as good as our ability to make it happen. We
must develop methods of measurement and control to
signal when deviations from the plan are occurring so
that corrective action can be taken.
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Defining Controlling
Controlling is the process managers go through to
control.
According to Robert Mocker, controlling is a systematic
effort by business management to compare performance to
predetermined standards, plans, or objectives to determine
whether performance is in line with these standards and
presumably to take any remedial action required to see that
human and other corporate resources are being used in the
most effective and efficient way possible in achieving
corporate objectives.
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The Controlling Subsystem

As with the planning, organizing, and influencing
functions described in earlier chapters, controlling can
be viewed as a subsystem that is part of the overall
management system. The purpose of the controlling
subsystem is to help managers enhance the success of
the overall management system through effective
controlling. Figure 5.1 shows the specific ingredients of
the controlling subsystem.
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Figure 5.1
Relationship between overall
management system and
controlling subsystem
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The Controlling Process

As the process (controlling process) segment of
Figure 5.2 implies, the three main steps of the
controlling process are
(1) Measuring performance
(2) Comparing measured performance to
standards
(3) Taking corrective action.
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Figure 5.2
The Controlling subsystem
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Measuring Performance. Before managers

can determine what must be done to make an
organization more effective and efficient, they must
measure current organizational performance. And
before such a measurement can be taken, some unit of
measure that gauges performance must be established
and the quantity of this unit generated by the item
whose performance is being measured must be
observed.
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Comparing Measured Performance to Standards. Once

managers have taken a measure of organizational
performance, their next step in controlling is to compare
this measure against some standard.
A standard is the level of activity established to serve as a
model for evaluating organizational performance. In es-
sence, standards are the yardsticks that determine if
organizational performance is adequate or inadequate.
Studying operations at General Electric gives insight into
the different kinds of standards managers can establish,
such as the following:
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1.Profitability standards. In general, these •

standards indicate how much money General Electric would like to
make as profit over a given time period-that is, its return on
investment. More and more General Electric is using computerized
preventative maintenance on its equipment to help maintain
profitability standards. Such maintenance programs at General
Electric help to reduce labor costs and equipment downtime and
thereby help to raise company profits.
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2.Market position standards. These standards

indicate the share of total sales in a particular
market that General Electric would like to have
relative to its competitors. As an indication of
market position standards at General Electric, John
F. Welch, Jr., company chairman, announced in
1988 that any product his company offers must
have the highest or second highest market share
when compared against all products offered by
competitors.
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3. Productivity standards. How much various

segments of the organization should produce is the
focus of these standards. Management at General
Electric has found that one of the most successful
methods of convincing organization members to be
committed to increasing company productivity is
simply to treat them with dignity and make them feel
they are part of the General Electric team.
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4.Product leadership standards. General

Electric would like to assume one of the lead
positions in its field in product innovation. Product
leadership standards indicate what must be done to
attain such a position. Reflecting this interest in
innovation, General Electric has been a pioneer in
developing synthetic diamonds for industrial use. In
fact, General Electric is considered by most a leader
in this area, having recently found a method for
making synthetic diamonds at a purity of 99.9
percent. In all probability, such diamonds will even-
tually be used as a component of super-high-speed
computers.
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5.Personnel development standards. Standards in

this area indicate the type of training programs to which
General Electric personnel should be exposed to develop
appropriately. General Electric's commitment to
sophisticated training technology is an indication of the
seriousness with which the company pursues personnel
development standards. Company training sessions are
commonly supported by sophisticated technology like
large-screen projection systems, computer-generated
visual aids, combined video and computer presentations,
and laser videos.
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6.Employee attitudes standards. These

standards indicate the types of attitudes that General Electric
management should strive to develop in its employees. Building
attitudes in employees toward enhancing product quality
reflects a modern employee attitude standard that General
Electric and many other companies are presently striving to
achieve.
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7.Social responsibility standards. General Electric

recognizes its responsibility to make a contribution to society.
Standards in this area outline the level and types of
contributions that should be made. One recent activity at
General Electric that reflects social responsibility standards is
a renovation of San Diego's Vincent de Paul Joan Kroc center
for the homeless. Work teams made up of General Electric
employees painted, cleaned, and remodeled a building to
create a better facility for a number of San Diego's
disadvantaged citizens.
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8.Standards reflecting relative balance

between short- and long-range goals.
General Electric recognizes that short-range
goals exist to enhance the probability that
long-range goals will be attained. These
standards express the relative emphasis that
should be placed on attaining various short-
and long-range goals
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Types of Control
There are three types of management control:
(1) Precontrol
(2) Concurrent control
(3) Feedback control
The type is determined primarily by the time period in
which the control is emphasized in relation to the
work being performed.
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Precontrol
Control that takes place before work is performed is called
precontrol, or feed forward control. In this regard,
management creates policies, procedures, and rules aimed at
eliminating behavior that will cause undesirable work results.
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Concurrent Control
Control that takes place as work is being performed is called
concurrent control. It relates not only to human performance
but also to such areas as equipment performance and
department appearance.
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Feedback Control
Control that concentrates on past organizational
performance is called feedback control. Managers
exercising this type of control are attempting to take
corrective action within the organization by looking at
organizational history over a specified time period.
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The Controller and Control

Organization charts developed for medium-and large-
sized companies typically contain a position called
controller. The sections that follow explain more about
controllers and their relationship to the control function
by discussing the job of the controller and how much
control is needed within an organization.
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The Job of the Controller

The controller (also sometimes called the comptroller) is usually a staff
person who gathers information that helps managers control. From the
preceding discussion, it is clear that managers have the responsibility of
comparing planned and actual performance and of taking corrective action
when necessary. In smaller organizations, managers may be completely
responsible for gathering information about various aspects of the
organization and developing necessary reports based on this information. In
medium- or large-sized companies, however, the controller handles much of
this work. The controller's basic responsibility is assisting line managers with
the controlling function by gathering appropriate information and generating
reports that reflect this information.
The controller usually works with information about the following financial
dimensions of the organization: (1) profits, (2) revenues, (3) costs, (4)
investments, and (5) discretionary expenses.
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Power and Control

To control successfully, managers must understand not only the
control process itself but also how organization members relate to it.
Up to this point, the chapter has emphasized nonhuman variables of
controlling. This section focuses on power, perhaps the most
important human-related variable in the control process. The
following sections discuss power by (1) presenting its definition, (2)
elaborating on the total power of managers, and (3) listing the steps
managers can take to increase their power over other organization
members.
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A Definition of Power
Perhaps the two most often confused terms in management are power and
authority. Authority was defined in chapter 10 as the right to command or give
orders. The extent to which an individual is able to influence others so that they
respond to orders is called power. The greater this ability, the more power an
individual is said to have.

Obviously, power and control are closely related. To illustrate, after a manager
compares actual performance with planned performance and determines that cor-
rective action is necessary, orders usually are given to implement this action.
Although the orders are issued through the manager's organizational authority,
they may or may not be followed precisely, depending on how much power the man-
ager has over the individuals to whom the orders are addressed.
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Total Power of a Manager

The Total Power a manager possesses is made up of two
different kinds of power: position power and personal power.
Position power is power derived from the organizational position a
manager holds. In general, moves from lower-level management to
upper-level management accrue more position power for a manager.
Personal power is power derived from a manager's human
relationships with others.
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Steps for Increasing Total Power

Managers can increase their total power by increasing their
position power or their personal power. Position power generally
can be increased by a move to a higher organizational position, but
managers usually have little personal control over moving upward
in an organization. Managers do, however, have substantial control
over the amount of personal power they hold over other
organization members. John P. Kotter stresses the importance of
developing personal power:
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To be able to plan, organize, budget, staff, control, and evaluate,

managers need some control over the many people on whom they are
dependent. Trying to control others solely by directing them and on
the basis of the power associated with one's position simply will not
work—first, because managers are always dependent on some people
over whom they have no formal authority, and second, because
virtually no one in modern organizations will passively accept and
completely obey a constant stream of orders from someone just
because he or she is the "boss."
To increase personal power, a manager can attempt to develop:
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A sense of obligation in other organization

members that is directed toward the manager. If a
manager is successful in developing this sense of
obligation, other organization members think they
should rightly allow the manager to influence them
within certain limits. The basic strategy generally
suggested to create this sense of obligation is to
do personal favors for people.
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A belief in other organization members that the

manager possesses a high level of expertise
within the organization. In general, a manager's
personal power increases as organization members
perceive that the manager's level of expertise is
increasing. To increase the perceived level of
expertise, the manager must quietly make
significant achievement visible to others and rely
heavily on a successful track record and respected
professional reputation.
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A sense of identification that other organization

members have with the manager. The manager
can strive to develop this identification by behaving in
ways that other organization members respect and
by espousing goals, values, and ideals commonly
held by them. The following description illustrates
how a certain sales manager took steps to increase
the degree to which his subordinates identified with
him:
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Performing the Control Function

Controlling can be a detailed and intricate process, especially
as the size of the organization increases.

Potential Barriers to Successful Controlling

Managers should take steps to avoid the following potential
barriers to successful controlling:
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1.Control activities can create an undesirable

overemphasis on short-term production as
opposed to long-term production. As an example, in
striving to meet planned weekly production quotas, a
manager might "push" machines in a particular area and
not allow these machines to be serviced properly. This
kind of management behavior would ensure that planned
performance and actual performance are equivalent in the
short term but may cause the machines to deteriorate to
the point that long-term production quotas are impossible
to meet.
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2.Control activities can increase employee

frustration with their jobs and thereby
reduce morale. This reaction tends to occur
primarily when management exerts too much
control. Employees get frustrated because they
perceive management as being too rigid in its
thinking and not allowing the freedom necessary to
do a good job. Another feeling that employees may
have from overcontrol is that control activities are
merely a tactic to pressure workers to higher
production.
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3.Control activities can encourage the falsification of

reports. Employees may perceive management as basing corrective action
solely on department records with no regard to extenuating circumstances. If
this is the case, employees may feel pressured to falsify reports so that
corrective action regarding their organizational unit will not be too drastic.
For example, actual production may be overstated in order that it will look
good to management, or it may be understated to create the impression that
planned production is too high, thereby tricking management into thinking
that a lighter work load is justified.
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4.Control activities can cause the perspective of

organization members to be too narrow for the good of the
organization. Although controls can be designed to focus on relatively
narrow aspects of an organization, managers must keep in mind that any
corrective action should be considered not only in relation to the specific
activity being controlled but also in relation to all other organizational units.
For example, a manager may determine that actual and planned production are
not equivalent in a specific organizational unit because of various periods when
a low inventory of needed parts causes some production workers to pursue
other work activities instead of producing a product.
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5.Control activities can be perceived as the goals

of the control process rather than the means by
which corrective action is taken. Managers must
keep in mind that information should be gathered and
reports should be designed to facilitate the taking of
corrective action within the organization. In fact, these
activities can be justified only if they yield some
organizational benefit that extends beyond the cost of
performing them.
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Making Controlling Successful

In addition to avoiding the potential barriers to successful controlling
mentioned in the previous section, managers can perform certain activities to make
the control process more effective. In this regard, managers should make sure that:

1. Various facets of the control process are appropriate

for the specific organizational activity being focused
on. As an example, standards and measurements concerning a line
worker's productivity are much different from standards and measure-
ments concerning a vice president's productivity. Controlling ingredients
related to the productivity of these individuals, therefore, must be
different if the control process is to be applied successfully.
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2.Control activities are used to achieve many different

kinds of goals. According to Jerome, control can be used for such
purposes as standardizing performance, protecting organizational
assets from theft and waste, and standardizing product quality.
Managers should keep in mind that the control process can be
applied to many different facets of organizational life and that, for
the organization to receive maximum benefit from controlling, each
of these facets should be emphasized.
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3.Information used as the basis for taking corrective action is

timely? Some time necessarily elapses as managers gather control-
related information, develop necessary reports based on this
information, decide what corrective action should be taken, and
actually take the corrective action. However, information should be
gathered and acted on as promptly as possible to ensure that the
situation, as depicted by this information, has not changed and that
the organizational advantage of corrective action will, in fact,
materialize.
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4.The mechanics of the control process are understandable to all

individuals who are in any way involved with implementing the
process. Managers should take steps to ensure that people know
exactly what information is necessary for a particular control process,
how that information is to be gathered and used to compile various
reports, what the purposes of various reports actually are, and what
corrective actions are appropriate given various possible types of
reports. The lesson here is simple: For control to be successful, all
individuals involved in controlling must have a working knowledge
of how the control process operates.
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Prof. Dr. Wageeh A. Nafei