by Control Mechanisms are the tools and systems used by management to ensure that actual performance matches planned standards and organizational goals are achieved efficiently. They are part of the controlling function of management.
Control mechanisms help in measuring progress, identifying deviations, and taking corrective actions in time. They include setting standards, measuring actual performance, comparing results, and correcting deviations.
Common mechanisms are budgetary control, quality control, inventory control, performance appraisal, internal audit, MIS reports, and Balanced Scorecard. Effective control ensures optimum utilization of resources, discipline, and achievement of objectives with minimum wastage and maximum efficiency.
Types of Control:
1. Feedforward Control
Feedforward Control, also known as preliminary or preventive control, is exercised before organisational activities actually begin. Its purpose is to identify and prevent potential problems before they affect performance. Managers examine plans, resources, policies, budgets, employee qualifications, and other inputs to ensure that they meet required standards. For example, checking the quality of raw materials before production begins helps prevent defects in finished products. Feedforward control is proactive because it focuses on preventing deviations rather than correcting them later. It helps organisations reduce risks, avoid unnecessary costs, and improve the likelihood of achieving planned objectives effectively.
2. Concurrent Control
Concurrent Control is exercised during the performance of organisational activities. It involves continuously monitoring ongoing operations to identify deviations and take corrective action immediately. Managers, supervisors, and employees observe work processes, quality standards, costs, and productivity while activities are being performed. For example, a production supervisor may check products during manufacturing to detect defects before the entire batch is completed. Concurrent control provides real-time information and immediate correction, reducing the possibility of major losses. It is particularly useful where continuous monitoring is possible. Thus, concurrent control helps maintain quality, efficiency, productivity, and compliance during ongoing operations.
3. Feedback Control
Feedback Control, also called post-action control, is applied after organisational activities have been completed. It involves comparing actual results with predetermined standards or objectives to identify deviations and evaluate performance. Managers analyse information such as sales results, profits, production levels, customer feedback, and employee performance. If deviations are identified, corrective measures can be introduced to improve future performance. Although feedback control cannot change completed activities, it provides valuable learning and performance information for future planning. It helps organisations identify weaknesses, reward achievements, improve processes, and develop better strategies. Therefore, feedback control supports continuous improvement and future decision-making.
4. Financial Control
Financial Control involves monitoring and regulating an organisation’s financial resources and performance to ensure their efficient utilisation. Managers use tools such as budgets, financial statements, ratio analysis, cash-flow analysis, and cost controls to compare actual financial results with planned standards. It helps identify deviations in revenue, expenditure, profitability, liquidity, and investment. Effective financial control prevents wastage, overspending, and misuse of funds while supporting sound financial decision-making. It also helps management maintain financial stability and achieve organisational objectives. Thus, financial control is essential for ensuring efficient resource utilisation, profitability, accountability, and financial discipline.
5. Operational Control
Operational Control focuses on monitoring the day-to-day activities and processes of an organisation. It ensures that routine operations are performed according to established plans, standards, procedures, and schedules. Managers may monitor production, inventory, quality, employee attendance, delivery schedules, and service performance. Operational control helps identify deviations quickly and enables managers to take corrective action before problems become serious. It is particularly important for maintaining consistent quality and productivity in routine operations. Effective operational control ensures that organisational resources are used efficiently and that daily activities contribute to the achievement of broader organisational goals and performance standards.
6. Strategic Control
Strategic Control evaluates whether an organisation’s long-term strategies and objectives remain appropriate and are being implemented effectively. It involves monitoring changes in the external environment, competitive conditions, organisational capabilities, and strategic performance. Managers compare actual strategic outcomes with desired objectives and determine whether strategies need modification. For example, changes in technology or customer preferences may require an organisation to revise its competitive strategy. Strategic control is important because business environments are dynamic and long-term plans may become unsuitable over time. It promotes adaptability, strategic alignment, and continuous evaluation, helping organisations maintain competitiveness and achieve long-term objectives.
Techniques of Control:
1. Budgetary Control
Budgetary Control is a technique of control in which management prepares budgets for future activities and compares actual performance with budgeted performance. Budgets may be prepared for sales, production, purchases, cash, expenses, and capital expenditure. The comparison helps managers identify variations or deviations and determine their causes. Corrective action can then be taken to keep activities within planned limits. Budgetary control promotes financial discipline, efficient resource utilisation, coordination, and responsibility among departments. It also assists management in planning and performance evaluation. Thus, budgetary control is an important technique for maintaining cost control, financial efficiency, and achievement of organisational objectives.
2. Standard Costing
Standard Costing is a control technique in which predetermined or standard costs are established for materials, labour, and other production activities. Actual costs are subsequently compared with these standards to identify cost variances. Managers analyse favourable and unfavourable variances and investigate their causes, such as changes in material prices, labour efficiency, or production methods. Corrective measures can then be introduced to improve cost efficiency. Standard costing is particularly useful in manufacturing organisations for controlling production costs and evaluating departmental performance. It supports cost reduction, efficiency measurement, accountability, and managerial decision-making by providing clear cost standards for comparison.
3. Break-Even Analysis
Break-Even Analysis is a technique used to determine the level of sales or production at which total revenue equals total cost, resulting in neither profit nor loss. The break-even point helps managers understand the relationship between fixed costs, variable costs, sales volume, and profit. It can be used to determine minimum sales requirements, assess profitability, and evaluate the effect of changes in price or costs. Managers can also use it for planning production levels and making pricing decisions. Thus, break-even analysis supports cost control, profit planning, risk assessment, and managerial decision-making by identifying the point at which operations become profitable.
4. Ratio Analysis
Ratio Analysis is a technique of evaluating organisational performance by establishing relationships between selected items in financial statements. Ratios such as current ratio, debt-equity ratio, gross profit ratio, net profit ratio, and return on investment help managers assess financial performance and identify deviations from desired standards. Ratios may be compared with previous years, budgets, industry standards, or competitors. Such comparisons enable management to identify strengths, weaknesses, inefficiencies, and financial risks. Ratio analysis supports effective financial control and managerial decision-making. However, ratios should be interpreted carefully because they may be affected by accounting policies and changes in business conditions.
5. Internal Audit
Internal Audit is a systematic and independent examination of an organisation’s operations, records, controls, and procedures conducted to assess their effectiveness. Internal auditors examine financial transactions, compliance with policies, resource utilisation, risk management, and operational processes. The technique helps identify errors, fraud, inefficiencies, and weaknesses in internal controls. Audit findings are communicated to management, which can take corrective measures where necessary. Internal audit also promotes accountability and ensures that organisational activities are conducted according to established policies and procedures. Therefore, it is an important control technique for improving operational efficiency, risk management, compliance, and organisational governance.
6. Statistical Reports
Statistical Reports provide managers with numerical information about organisational performance for purposes of comparison, analysis, and control. Information may relate to sales, production, costs, employee performance, inventory, quality, customer complaints, or other operational activities. Data can be presented through tables, charts, graphs, averages, percentages, and trend analysis, making significant deviations easier to identify. Managers can compare current results with past performance, targets, budgets, or industry standards and take appropriate corrective action. Statistical reports support objective decision-making by reducing dependence on assumptions. Thus, they are useful for performance measurement, trend identification, forecasting, and managerial control.
Steps of Control Mechanisms:
1. Setting Performance Standards
This is the first step of control where standards are fixed for measuring performance. Standards are the benchmarks against which actual performance is compared. They should be specific, measurable, achievable, and expressed in terms of quantity, quality, time, and cost. For example, sales target of Rs. 10 lakhs per month or production of 100 units per day. Standards are set at planning stage for all key areas like production, sales, and finance. Clear standards provide direction to employees, serve as basis for evaluation, and ensure that controlling is objective, effective, and focused on achieving organizational goals.
2. Measuring Actual Performance
The second step is to measure the actual performance of employees and departments. This is done through various techniques like personal observation, written reports, MIS, sample checking, and performance appraisal. Measurement should be done on a regular basis, timely, and accurately to detect deviations early. For example, actual sales are measured from sales reports. The data collected must be reliable and in the same unit as standards to allow easy comparison. This step provides factual information about what is actually being done and helps management to know the real progress towards goals.
3. Comparing Actual Performance with Standards
In this step, actual performance is compared with the predetermined standards to find out deviations, if any. This comparison reveals whether performance is as per expectations or there is a gap. Comparison should be objective and impartial. If actual performance is equal to or more than standards, it is considered satisfactory. If it is less, it indicates negative deviation. For example, comparing actual sales of Rs. 8 lakhs with standard of Rs. 10 lakhs shows a shortfall of Rs. 2 lakhs. This step is crucial to identify problem areas requiring attention.
4. Analysing Deviations and Finding Causes
After comparison, significant deviations are analyzed to find out their causes. Not all deviations need action; only critical and controllable deviations are focused, as per principle of management by exception. Deviations may be due to unrealistic standards, inadequate resources, lack of training, or external factors. Analysis helps in understanding whether deviation is due to human error, technical fault, or environmental change. For example, sales shortfall may be due to poor marketing or recession. Identifying root causes is essential to take appropriate corrective measures and prevent recurrence.
5. Taking Corrective Actions
This is the final and most important step where corrective actions are taken to remove deviations and ensure future performance matches standards. If deviation is due to poor performance, actions like training, motivation, or change of staff are taken. If standards are unrealistic, they are revised. Corrective action should be taken promptly without delay to avoid further losses. It may involve improving working conditions, repairing machinery, or revising policies. Effective follow-up is also done to ensure that corrective measures are working and organizational goals are achieved efficiently.
Challenges of Control Mechanisms:
1. Difficulty in Setting Accurate Standards
One of the major challenges is setting accurate and realistic performance standards. In many areas like employee morale, creativity, and customer satisfaction, standards cannot be measured quantitatively, making control difficult. If standards are too high, they demotivate employees, and if too low, they lead to underperformance. Changes in technology, market conditions, and business environment make it hard to fix rigid standards. For example, setting a fixed sales target during recession is unrealistic. Lack of clear and measurable standards makes comparison and evaluation subjective, reducing the effectiveness of the entire control process.
2. Resistance from Employees
Control mechanisms often face strong resistance from employees as they are seen as a restriction on their freedom and autonomy. Employees feel that control is a tool to find their faults and punish them, creating fear and insecurity. This leads to negative attitude, lack of cooperation, and even manipulation of reports to show better performance. Excessive control reduces initiative and creativity. For example, strict supervision may make workers work only when watched. Overcoming this psychological resistance and making employees accept control as a guidance tool rather than a threat is a big challenge.
3. High Cost and Time Consuming
Implementing effective control mechanisms is costly and time-consuming. It requires huge expenditure on establishing systems like MIS, internal audit, quality inspection, and hiring experts for supervision. Small organizations cannot afford such expensive systems. Moreover, collecting data, preparing reports, and analyzing deviations takes a lot of time and effort of managers. Sometimes the cost of control exceeds the benefits derived from it, making it uneconomical. For example, installing CCTV and software for monitoring all activities may cost more than the losses it prevents, reducing overall profitability.
4. Influence of External Factors
Control mechanisms mainly focus on internal factors, but organizational performance is also affected by uncontrollable external factors like government policy, competition, recession, and technological changes. These factors cannot be controlled by management and make standards outdated quickly. For example, sales may fall due to entry of a new competitor or change in customer taste, not due to employee inefficiency. It is difficult to take corrective actions for such external deviations. This limits the scope of control and makes it challenging to distinguish between controllable and uncontrollable deviations.
5. Problem of Human Behavior and Manipulation
Control deals with human beings whose behavior is complex and unpredictable. Employees may try to manipulate data, hide actual performance, and provide false reports to avoid punishment. This is called window dressing. For example, production manager may show higher production by compromising quality. Also, too much emphasis on quantitative targets may lead employees to ignore qualitative aspects like customer relations. Understanding human psychology and ensuring honest reporting is difficult. This behavioral problem makes control less effective and requires careful handling with motivation and trust rather than just strict monitoring.
6. Over-Control and Loss of Flexibility
Another challenge is the danger of over-control. When managers exercise excessive control, it creates rigidity, delays decision-making, and kills employee creativity and initiative. Employees become dependent and avoid taking risks, following only rules and procedures. This reduces flexibility and adaptability to changing situations. Too many controls, reports, and approvals make the organization bureaucratic and slow. For example, requiring approval for every small expense wastes time. Balancing control with freedom is very difficult. Effective control should be flexible and supportive, not restrictive, which is hard to achieve in practice.
