Introduction
Control refers to the management function that entails the entirety of processes that effectively inform the manager of up-to-date events in main areas of operations in the organization, as well as facilitate needed changes to be carried out in the organization (Armesh, Salarzehi, & Kord 2010). Through the control process, projected results are achieved through accurate measurement and positive courses of action. Managers are an indispensable part of the control process in the organization; they check and assess the success of relations between stakeholders, such as employees and customers and organization resources and outcomes - inputs and outputs (Siska 2015). According to Stafford Beer, “management is the profession of control”. A broad perspective is thus necessary in the analysis of the control function of management; controls are set in place to protect the organization against undesirable behavior and problems such as personal limitations through lack of sufficient employee training and information.
Interlinking Concepts in Control Management
The Control Process
A basic control process entails a four-step course of action; these steps are interlinked and constitute as a comprehensive course of action for the control manager. These four steps constitute the definition of control management offered by Robert J. Mockler. The first step is to establish standards, the second to measure outcomes against the standards, the third step is to compare the performance against the standards, and lastly to correct variances from plans and set standards (Armesh, Salarzehi, & Kord 2010). Standards are designed as part of the organization’s general strategic plan. Such standards can be derived from statistical methods, past experiences, and benchmarking founded on the industry’s best practices (Chand, 2015). The standards can either be tangible though monetary, time, and numerical standards, or intangible through ethics, desirable attitudes, and cooperation. For instance, in the case of Crown Point Cabinetry, the business manager aimed to increase sales using a tangible standard by assuming a new management approach that was team-based (Govindarajan 2002). Standards are important in evaluating the performance of an organization.
The second step of performance measurement involves the preparations of quantitative and qualitative reports to gauge outcomes. The first and second steps are linked; performance measurements must be related to the set standards in the initial step of the process of control (Armesh, Salarzehi, & Kord, 2010). Case in point, if the set standard is sales growth in a particular period, then the performance measurement step will entail collecting and report data regarding sales during the period. The success of this interlink between the two steps depends on a regular and timely information flow; data collection and reporting can be from individual observations, statistical reporting, oral or written reporting, and accounting information (Chand, 2015). The balanced scorecard (BSC) is a model that is used to measure the performance of an organization. It was initially suggested in 1992 by Kaplan and Norton. The BSC model aims to assist organizations to translate set standards into performance measures (Armesh, Salarzehi, & Kord 2010). Analog Devices reported a 78% rate of growth due to an increase in market share thus they decided to reconsider their scorecard for dynamic environments (Govindarajan, 2002). Budgeting can also be used a mechanism of control to assess performance. This step of performance measurement is an essential component of the subsequent steps of making comparisons and taking corrective measures.
The third step of the control process is making comparisons between outcomes and standards. The process allows the manager to determine whether the set standards are met or not and if they have been exceeded according to the actual performance. After determining the position of performance against the standards, managers can then take corrective action; this is the last step (Straub & Zecher 2013). According to Harold Koontz, the second and fourth steps, which regard measurement and making corrections, entail the most important aspects of control management. The control process on its own is a comprehensive process. However, it is interlinked with the different types and levels of controls in many ways.
The Types of Controls
There are three main types of controls; internal, external, and timing controls. They are interlinked with the control process in many different ways. The need for different types of controls in an organization can be linked to the agency theory. According to this theory, the principal in an agency relationship will usually endeavor to control agents in a bid to lessen the costs associated with the relationship (Straub & Zecher 2013).
Time-based controls focus on the events occurring during a process – detective controls, before a process – preventive controls, or after a process – corrective controls. Preventive controls are also referred to as feed-forward controls, and their main objective is to anticipate possible problems and to apply control before the commencement of the activity or the occurrence of the problem (Chand 2015). Case in point, major airlines are known for implementing preventive maintenance through scheduled aircraft maintenance programs to avoid structural damage which could cause a disaster (Rao, 2010). This can also be implemented by hiring more technically-skilled new employees or gathering suitable input resources for the activity, such as in the case of McDonald’s introduction of their specific technology in India six years before opening a restaurant there (Rao 2010). Concurrent control is a time-based control implemented while the activity is in progress to ensure there is consistency with the set standards of quality. For instance, the method of direct supervision is applicable in the case of computer typing and programming. Feedback control is the corrective control action undertaken after the job has been completed. For example, rating the quality of a service after such as the ratings of television programs after they have been aired.
The controls in place at an organization can also be internal or external; these include market control, bureaucratic control, and clan control. Bureaucratic control refers to the rules, procedures, regulations, policies, and authority that are designed to govern particular actions of stakeholders in an organization to ensure that these actions do not deviate from the interests of the organization (Straub & Zecher 2013). The second is clan control that is a system designed to allow for traditions, beliefs, norms, and shared values as components of the organizational culture; this control is dependent on the power of collective identity. The third control is market control, which is anchored in market mechanisms of price and market share competition (Chand 2015). The control influences managers to allocate resources and direct other organizational decisions according to the market forces.
Levels of control
Managers of different levels at an organization have different control responsibilities. It can be strategic, structural, operational, and tactical. Operational control is focused on the processes implemented by the organization in the transforming of resources into products/services. These are lower management types of controls which include financial and quality controls (Chand 2015). 3M Corporation illustrates the operational control using its 30 Percent Rule, which requires that 30% of revenues should be derived from the introduction of recent products (Govindarajan, 2002). Structural controls regard the undertaking of necessary action in the organizational structure. The form of control is common at the top and middle management levels for example through implementing clan and bureaucratic types of control. Case in point Swiss multinational organizations with subsidiaries in India faces a unique problem regarding parent company and subsidiary relationship concerning culture, values, and norms (Rao 2010). According to the ethnocentric view, important positions of leadership in foreign subsidiaries should be filled by nationals of the parent country, however, the geocentric view suggests that staffing selections be based on the competency of an individual rather than their nationality (Straub & Zecher 2013). The tactical control is a middle management type of control that is concerned with departmental objectives. The management by objectives (MbO) model, which is a control mechanism of measurement of the achievement of organizational objectives, applies to this level of control. MbO entails the managerial process of focusing on results instead of activities; this method provides measurement and feedback of objective attainment at the middle management level (Straub & Zecher 2013). Strategic control is exercised mainly by top levels of management; this process entails the determination of the effectiveness of a strategy – business or functional, in assisting the organization to meet its objectives (Siska 2015). Different types and levels of controls are combined to formulate organizational control systems that assist organizations to attain their goals.
Organizational Control Systems
The control systems of organizations are often designed to suit the unique nature and needs of particular organizations. An effective organizational control system is one that focuses on the objectives and needs of the organization, offers warnings prompt warnings for timely action to be taken, is sustainable, flexible, and economical (Siska 2015). The organizational control concept can be explained in the theory proposed by Max Weber – bureaucratic theory. In Weber’s perspective, his theory comprises of concepts like the hierarchy of authority, a span of control, and closeness of supervision aspects which are applicable in management control (Chand 2015). These control systems are implemented through a variety of control techniques which apply to different areas of an organization.
Control Techniques
There are numerous techniques of control applicable to organizations. Financial controls are concerned with the use, mobilization, and return on funds; examples of these include financial statements, budgetary controls, financial audits, and breakeven analysis. Dell Computer Corporation used financial measures and nonfinancial measures to make the business more profitable by changing course from a product to service business (Govindarajan 2002). The transaction cost economics theory suggested by Willamson in 1975 emphasizes the need for carrying out internal audit order to reach the organization goal of cost minimization (Armesh, Salarzehi, & Kord 2010). Marketing controls focus on ensuring that the right products and services are received by consumers at the right place, price, and through appropriate means of communication; examples of these include market research, marketing statistics, and test marketing. Human resource control, information control, production control through inventory control and quality control, and project control through Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT) are among common techniques of control in organizations (Straub & Zecher 2013).
Reflecting on the Concept of Control
The timing of the control is an important aspect in determining the type of control to implement. There are a number of limitations and requirements that result in the application of controls at particular times. For instance, airlines implement feed forward controls to avoid disasters that would result in waiting to implement controls later on in the course of the activity – flying the plane. Feed forward, concurrent, and feedback controls are commonly placed types of control. The design of a control is also important whether internal or external; market, bureaucratic, and clan controls determine the organizational climate and must be devised and selected carefully in consideration of the company’s objectives. The levels of management-lower, middle, and top- are also important aspects that interact with the types and process of control uniquely. The different techniques implemented in organizations play an important role in areas, such as finance, marketing, and human resource. The techniques should also be suitably selected.
Conclusion
Control is a process in management which is aimed at attaining set objectives in an organization within a set period of time. The control process involves setting standards to be achieved, measuring the actual performance and then taking corrective action depending on the resulting variations. The control process is interlinked with the different types and levels of control. The types of control are internal, external, and timing controls. The levels of control are strategic, structural, operational, and tactical and these are subject to different levels of management from the lower and middle management levels to top management. A comprehensive management control system is thus characterized by a collection of controls which differ in type and levels and is implemented through different techniques which assist the process of achieving organizational objectives. Controlling is an indispensable management function that requires a skilled group of managers at different levels of the organization in order to achieve managerial goals. The agency theory describes the need for an effective management theory; this is to ensure that the agents fulfill their obligations to the principal and thus avoid negative outcomes. Different models, such as the balance score card, critical path method, and the bureaucratic theory are all relevant in understanding the relevance and significance of controlling in management. A successful organization relies on effective strategies that are made during the planning. However, controlling is just as essential to achieving company objectives.
References
Armesh, H., Salarzehi, H., & Kord, B. (2010). Management control system. Interdisciplinary Journal of Contemporary Research in Business, 2 (6): 193-206
Chand, S. (2015). Managerial control process: It's characteristics, importance, techniques and other details. YourArticleLibrary.com: The Next Generation Library. Retrieved 1 June 2016, from http://www.yourarticlelibrary.com/management/managerial-control-process-its-characteristics-importance-techniques-and-other-details/5383/
Govindarajan, V. (2002). Management control systems: Mini cases. Dartmouth: Dartmouth College Press.
Rao, S. (2010). Types of control. Citeman.com. Retrieved 1 June 2016, from http://www.citeman.com/10361-types-of-control.html
Siska, L. (2015). The concept of management control system and its relation to performance measurement. Procedia Economics and Finance, 25, 141-147. http://dx.doi.org/10.1016/s2212-5671(15)00722-4
Straub, E. & Zecher, C. (2012). Management control systems: A review. Journal of Management Control, 23(4), 233-268. http://dx.doi.org/10.1007/s00187-012-0158-7
