Control, Meaning, Definition, Types, Process and Requirements for Effective Control

Control is an important function of management concerned with ensuring that organizational activities are performed according to planned objectives and standards. It involves measuring actual performance, comparing it with predetermined standards, identifying deviations, and taking corrective action when necessary. Control helps managers determine whether plans are being properly implemented and whether organizational resources are being used efficiently. It is closely related to planning, because control evaluates actual performance against planned performance. Effective control does not merely identify mistakes; it also helps prevent future deviations and improve organizational performance. Therefore, control ensures that managerial efforts remain directed toward achieving organizational goals.

Definition of Control

Control has been defined by different management thinkers in various ways:

• Henry Fayol: “Control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued and principles established.”
• Koontz and O’Donnell: Control is the measurement and correction of performance in order to ensure that enterprise objectives and plans devised to attain them are accomplished.
• George R. Terry: Control is determining what is being accomplished, evaluating the performance, and, if necessary, applying corrective measures so that performance takes place according to plans.

Types of Control

• Feed-Forward Controls

These controls are proactive, aiming to identify and address potential problems before they arise. They can be diagnostic (indicating what has deviated from standards) or therapeutic (explaining why deviations occurred and recommending corrective actions).

• Concurrent (Prevention) Control

This type of control allows for adjustments during an ongoing process. By establishing clear job descriptions and specifications, concurrent controls prevent errors before they happen, improving overall efficiency.

• Feedback Controls

Feedback controls are historical and assess performance after the fact. They focus on end results and provide information for future activities to avoid repeating past mistakes.

Controlling Process in Business Management

• Setting Performance Standards

The first step involves establishing benchmarks for measuring actual performance, which can be quantitative (e.g., revenue targets) or qualitative (e.g., improving employee motivation).

• Measurement of Actual Performance

After setting standards, actual performance is measured using various techniques, such as performance reports, financial ratios, and direct observation.

• Comparing Actual Performance with Standards

This step involves evaluating actual results against the established standards to identify any deviations.

• Analyzing Deviations

Significant deviations warrant urgent management attention, while minor deviations can be addressed later. Techniques such as critical point control and management by exception are useful in this phase.

• Taking Corrective Action

If deviations exceed acceptable limits, management must implement corrective measures to align performance with standards, focusing particularly on critical areas that impact overall business success.

Control Techniques

Control Techniques are methods used by managers to ensure that organizational goals are achieved effectively and efficiently. They involve measuring actual performance against established standards, identifying deviations, and implementing corrective actions. Common control techniques include direct supervision, financial analysis, budgetary control, and management information systems. These techniques help organizations monitor operations, assess performance, and make informed decisions, ultimately facilitating continuous improvement and ensuring that objectives are met within the desired timeframe and resource constraints.

Types of Control Techniques

• Direct Supervision and Observation

This is the oldest technique of controlling, where supervisors observe employees directly during their work. This method allows supervisors to address issues in real-time and gain firsthand insights into employee performance. It’s particularly effective in small businesses where close interaction is feasible.

• Financial Statements

Organizations prepare Profit and Loss Accounts and Balance Sheets to summarize financial performance over specific periods. These statements help compare current figures with previous years and facilitate ratio analysis, which assesses profitability, liquidity, and solvency.

• Budgetary Control

Budgetary control involves the establishment of budgets for various business aspects, including income, expenditures, production, and capital. It serves as a managerial control tool, enabling businesses to monitor financial performance against planned budgets.

• Break-Even Analysis

Break-Even Analysis identifies the point at which total revenues equal total costs, meaning no profit or loss is incurred. By determining this point, businesses can assess performance and make necessary adjustments to improve future outcomes.

• Return on Investment (ROI)

ROI measures the profitability of investments in fixed assets and working capital. A high ROI indicates strong financial performance, while a low ROI highlights areas needing improvement. It allows for performance comparisons over time and between firms.

• Management by Objectives (MBO)

MBO is a collaborative process where objectives are set jointly by superiors and subordinates. It includes periodic evaluations and feedback, ensuring that individual performances are assessed against established goals, which can lead to rewards for achievement.

• Management Audit

Management audit evaluates the entire management process, including planning, organizing, directing, and controlling. Conducted by experts, it assesses efficiency by analyzing plans, objectives, policies, and procedures, providing insights into managerial performance.

• Management Information System (MIS)

MIS collects and processes accurate information about internal operations and external environments. By providing managers with relevant data, it supports informed decision-making and allows for effective delegation without losing control.

• PERT and CPM Techniques

Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) focus on the sequential completion of activities within a project. These techniques help manage time and resources effectively, ensuring timely project completion.

• Self-Control

Self-control empowers individuals to set their own targets and evaluate their performance independently. While it’s crucial for top-level managers, subordinates should also be encouraged to adopt self-control to reduce the burden of constant oversight by superiors.

Requirements for Effective Control

1. Clear Objectives and Standards

Effective control requires clearly defined organizational objectives and performance standards. Managers must know what results are expected before actual performance can be measured. Standards should be specific, realistic, measurable, and related to organizational goals. Clear standards provide a basis for comparing actual performance and identifying deviations. They also help employees understand the level of performance expected from them. Without proper standards, control becomes uncertain and managers may find it difficult to determine whether activities are progressing satisfactorily.

2. Accurate and Reliable Information

Effective control depends on accurate, relevant, and reliable information about organizational performance. Managers need timely information regarding production, sales, costs, employee performance, quality, and other important activities. Incorrect or incomplete information can lead to inappropriate decisions and ineffective corrective action. Therefore, organizations should establish reliable reporting and information systems. Proper information enables managers to identify deviations accurately and take suitable action before problems become serious.

3. Timely Reporting

Control should provide timely information and reports to managers. Information received too late may lose its usefulness because corrective action may no longer be effective. Managers should receive performance reports at appropriate intervals depending on the nature of the activity. For example, critical production activities may require frequent monitoring, while routine activities may be reviewed periodically. Timely reporting enables management to identify problems quickly and respond before deviations significantly affect organizational performance.

4. Flexibility

An effective control system should be flexible enough to adjust to changes in organizational conditions. Business environments may change because of technology, competition, customer preferences, economic conditions, or government policies. Rigid control systems may become unsuitable when circumstances change. Managers should therefore be able to modify standards, procedures, and methods when necessary. Flexible control enables organizations to respond to changing conditions while continuing to maintain appropriate performance standards.

5. Economy and Cost Effectiveness

The control system should be economical and cost-effective. The cost of establishing and operating control mechanisms should not exceed the benefits obtained from them. Organizations should concentrate control efforts on important activities where deviations can significantly affect performance. Excessive monitoring can waste time, money, and managerial resources. An economical control system provides useful information and effective supervision while keeping administrative costs within reasonable limits.

6. Simplicity

An effective control system should be simple and easy to understand. Employees and managers should be able to understand the standards, procedures, reports, and methods used for controlling performance. Complicated control systems may create confusion, increase administrative work, and reduce employee cooperation. Simple procedures make it easier to identify deviations and take corrective action. Therefore, control mechanisms should be designed according to the organization’s size, activities, and managerial requirements.

7. Focus on Critical Areas

Effective control requires managers to concentrate on critical areas and significant deviations. It is not practical or necessary to monitor every activity with the same level of attention. Managers should identify key areas where performance has a major effect on organizational objectives, such as costs, quality, productivity, sales, and customer satisfaction. The exception principle can be applied by giving greater attention to significant deviations. This allows managers to use their time and resources efficiently.

8. Corrective Action

The purpose of control is not simply to identify deviations but to ensure appropriate corrective action. When actual performance differs significantly from standards, managers should determine the causes and take suitable measures. Corrective action may involve changing methods, reallocating resources, providing employee training, revising schedules, or modifying plans. A control system is effective only when identified problems lead to meaningful improvements in performance and help the organization return toward its planned objectives.