Control System - POM TU notes

Meaning/Concept of Control 

Control is one of the important functions of management.   It involves the development of performance standards or indicators,  measuring the actual performance, and taking corrective actions,  if any,  deviation exists between the standard and actual performance. It is also called a performance evaluation.  
Controlling -Bikram Adhikari

Process/Steps of Control System 

1.    Determine  the  area  of  control:  
The first step in the control process is determining the major control areas of the organization. The controls should be based on the organizational mission and goals.  The choice of areas is important because it is expensive and virtually impossible to control every aspect of the organization. 
2.     Set  control  standards: 
 The second step n the control process is establishing control standards.   The standards are the targets against which the subsequent performance is compared. They enable managers to evaluate performance.  Normally,  performance is measured in terms of quantity,  quality, time cost, and behavior. 
3.     Measure  actual  performance: 
 Once standards are determined,  the next step is measuring the actual performance.  Under this,  assessment is done regularly to ensure that plans,   programs,   projects, budgets, and procedures are moving ahead towards the organizational goals.  The aim behind this is to take corrective action in case of deviations.  Information is collected from internal as well as external sources for performance evaluation. A strong management information system works as a foundation for performance evaluation. 
4.    Compare  actual  performance  with  standards:
  After the measurement  of actual performance,  it should be  compared to the standards.  It determines the  variation between actual  performance and standard.  If the performance matches  the standard,  the process of  control stops.  Otherwise,  attempts should be made to determine the reasons for the deviations. 
5.      Determine   the   reasons for deviations: 
  This step of   the control process   involves finding the  reasons for deviations between the standard and  actual performance.  The organization needs  to identify the  deviations due to internal  shortcomings or external  changes that are beyond the organization's control. 
6.   Take  corrective  action: 
 The final step in the  control process is  to take corrective action. This includes a re-examination of plans, programs, goals, and strategies.  
7.   Feedback: 
  It involves  reviewing  the control  process  after taking  corrective  actions.  This is  done  to enhance  the  effectiveness of the control process  or  mechanism.  

Types of Control Systems 

Control is  a  managerial activity  that  ensures the  organizational  activities are heading in the right  direction.  There are  different  types of  controls  based on the focus of control and timing of control.

A. based on Focus 

 Based on focus, control may be classified into three types. They are discussed below. 
1.   Input   control: 
 They focus on  inputs  such as  knowledge,  skills,  abilities,  values, and motives  of  the employees.  They ensure  the  proper input  in  the work process. 
2.   Behavioral   control:  
They specify  work procedures.  They are  related  to the  ways    of doing    organizational    activities through    policies,    rules, and procedures. 
3.   Output   control:  
They focus  on  performance outcomes.  They  deal  with  the   results through the use of targets or milestones. 

B. based on Timing 

 Based on timing, control can be classified as feedforward, concurrent, and feedback control. 
1.   Feed-forward/Pre/Input   control: 
 Feedforward  control  involves  identifying  and preventing problems in an organization before they occur. It anticipates problems  in  advance  and  prepares  to  solve  them.  Hence,  it  is  proactive  and  preventative.  In  other  words, feed-forward control  involves  taking  actions  before  the  problem  takes  place.  So,  problems  can  be  prevented  rather  than  just taking corrective actions when they take place. 
2.   Concurrent/Process/Throughput     control:   
  Concurrent     control     involves     identifying and preventing problems in an organization as they occur. Direct supervision  is  the  best  form  of  concurrent  control.  Another  form  would  be  management  by  walking  around  i.e.  directly  interacting  with  the  employees  in the working areas. The main benefit of concurrent control is problems can be corrected before they become too costly. 
3.   Feedback/Post/Output   control: 
 Feedback  control  involves  identifying  and  correcting problems in an organization after they occur. It is used when feed-forward and concurrent controls are too costly or time-consuming. Feedback control  has  some  advantages.  First,  feedback  helps  to  evaluate  the  planning  effectiveness.  It  also  provides  motivation,  since  the  workers  know  how  well  they are performing their duties.

Purpose /Importance of Control System:

  The following are the importance or purpose of a control system. 
 1.Cope the environment: Modern organizations operate in a changing environment. Changes in products, laws and regulations, technology, and competitive forces are common. The control functions help the organizations to cope with environmental dynamism and complexity.
 2.Accomplish organizational goals: The controlling functions in an organization guide the activities of the employees. Likewise, they ensure that the human and other resources are utilized most possibly. In this way, controlling provides aid to accomplish organizational goals. 
 3.Improve efficiency: The controlling process involves determining standards and comparing them to actual performance and taking corrective actions if required. This remains a continuous process as a result of which efficiency in job performance improves. 
 4.Facilitate coordination: Through the unity of direction, an effective control system facilitates coordination between the units or departments in the organization. It helps to remove duplication and overlapping of works and promote cooperation within the organization. 
 5.Add value: An organization should constantly add value to the products or services to withstand competition. Controlling provides a great tool for quality improvement and adds the value of products and services for superior customer satisfaction.
 6.Facilitate delegation: Delegation of authority means granting power to subordinates to function within prescribed rules. It refers to the flow of authority and powers downwards to the subordinate. Controlling is essential for delegation to ensure that authorities are used properly. 
 7.Maintain discipline: Controlling helps to maintain the discipline of the employees in the organization. It ensures following rules, procedures, policies, and standards which motivates them toward discipline and morality. It finally helps in effectively achieving performance. 
 8.Guide future action: Controlling involves the comparison of the actual performance with the standard and analyzes the weaknesses deficiencies. The plans and actions are determined in a way that similar deviations are prevented in future performance. In this way, controlling guides for future actions. 
 9.Effective supervision: Controlling involves the determination of standards and providing timely guidance and instructions to the employees to overcome the weaknesses in actual performance. The standards serve as the guidance for job performance as a result of which supervision is easy and effective. 

 Essentials of Effective Control 

 There is no one ideal control system. It depends on the size, management style, purpose, problems, and strengths. The following are some of the guidelines for proper control. 
 1. Economical: Control activities must be economical. Too much information distorts control and evaluation. It should be meaningful and relate to a firm’s objectives. 
 2. Timeliness: Control activities should provide timely information to the managers. 
 3. Provide true picture: Control should be designed to provide a true picture of what is happening. 
 4. Action-oriented: Information derived from the control process should facilitate action. It should not merely be information-oriented. 
 5. Foster mutual understanding, trust, and common sense: Control should foster mutual understanding, trust, and common sense among the units or departments in an organization. 
 6. Simple: Control should be simple. Complexity creates confusion. 
 7. Convincing: Control should be able to convince the employees that failure to accomplish certain objectives within a prescribed time is not necessarily a reflection of their performance. 
 8. Objective: Control should be based on facts and information. It should not be done on guess and hunch. 
9. Flexible: The control system should be flexible. It should have sufficient ground of modification and adjustment when required. 
10. Future-oriented: The control system should be future-oriented. It should be able to identify present weaknesses and limitations so that future performance may be improved.

Nature/Characteristics of Effective Control System

A control system has the following characteristics.
 1.   A  management  function:  
Control  is  one  of  the  important  functions  of  management. Without it, the other functions of management are worthless.
 2.   Continuous   process: 
Control is related to performance measurement. Hence, it is a continuous managerial function.   
3.   Plan/Guidelines   oriented: 
Control involves finding the reasons for deviations in performance if any. It further guides the management to take action in the future  to  improve  organizational  performance.  The  guidelines  are  derived  from approved plans.  
4.   Corrective   action: 
  Controlsystemensures  the  organization  is  going  in  the  right  direction.  Hence,  it  focuses  on  taking  corrective  actions  in  case  of  deviations. 
5.   An   end   function:
   Generally,   the   control   starts   when   performances   are   measured. Hence, it is an end function. 
6.   Dynamic  and  pervasive  function: 
 The  control  system  should  be  reviewed  and  updated  with  the  change  in  situation.  Hence,  it  is  a  dynamic  function.  Likewise,  it  covers  all  aspects  of  an  organization.  Hence,  it  is  pervasive  in  nature. Control is performed by managers at all levels and areas. So, it is also a pervasive function.
7.    Focus  on  key  performance:  
Control  focuses  on  key  performance areas of  the  organization. 
 The  control  system  does  not  only  focus on the  part  and  present  function.  It  also  focuses  how  organizational  functioning  may  be  improved in the future based on jobs performed.  

Control Tools and Techniques

 There  are several tools  and  techniques  used  for  control.  Some  major  ones  are discussed below. 
  1.   Direct   supervision:   
This  is  the  oldest  technique  of  control.  Under  this  technique,  the  manager  personally  observes  the  functioning  in  the workplace. He/she gets first-hand information and takes corrective actions as and when needed. Due to this, the employees work cautiously and honestly. Observing every employee is time-consuming, hence costly. This technique is opposed by the creative, honest, and efficient employee. The observer may be biased  in  performance  evaluation.  This  technique  of  control  is  suitable  for  small organizations with fewer employees. 
2.   Budgetary   control:  
 A  budget  is  the  quantitative  expression  of  future  plan.  Budgetary  control  is  a  technique  of  control.  A  Budget  may  be  prepared  for  expenses,  incomes,  cash  flow,  capital,  production,  and  sales.  It  provides  a  standard by which actual performance can be evaluated to detect deviations and  take  corrective  actions  are  taken  if  required.  Budgetary control  is  a  highly effective tool to control the day-to-day operations of the organization. 
3.    Break-even  analysis:  
The breakeven analysis  assesses  relationships  among  cost,  volume, and profit. It identifies the breakeven point where revenue equals costs.  Profit  is  possible  when  sales  exceed  the  breakeven  point.  Hence,  the  breakeven  point  acts  as  the  standard.  If  the  organization  fails  to  reach  the  breakeven  point,  reasons  are  identified  and  analyzed  so  that  corrective  actions may be taken in the future. 
4.   Return on investment (ROI): 
ROI is calculated by dividing the net profit by the total  amount  of  investment.  The  basic  concept  behind  ROI  as  a  technique  of   Controlling    is  the  volume  of  profit  itself  does  not  reflect  the  firm  performance  unless it is compared with the investments. The actual ROI may be compared with the expected ROI and actions are taken if required. 
5.   Responsibility      accounting: 
  Under      responsibility      accounting,      the      organization  is  divided  into  smaller  units,  called  the  responsibility  centers,  and a manager is held responsible for achieving the targets of each unit. The managers are supposed to control the activities of their respective centers. The performance of each responsibility center is compared and evaluated against the targets. 
6.   Management   audit:  
 A  management  audit  is  a  systematic  assessment  of  the  overall performance of the management of the organization. Its objective is to review  the  efficiency  and  effectiveness  of  the  management  in  line  with  the  goals  of  the  organization.  In  other  words,  a  management  audit  evaluates  whether   the   management   is   working   in   the   interests of   shareholders,   employees,  and  other  stakeholders.  Some  independent  consultants  are  hired  to conduct the management audit

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