INTRODUCTION TO

CONTROLLING
What is controlling?
• It’s the process of monitoring, comparing, and correcting work
performance.
• All managers should control even if their units are performing as
planned because they can’t really know that unless they’ve evaluated
what activities have been done and compared actual performance
against the desired standard.
• Effective controls ensure that activities are completed in ways that
lead to the attainment of goals.
What Is Control?
• Controlling - the process of monitoring, comparing, and correcting
work performance.
• The Purpose of Control
• To ensure that activities are completed in ways that lead to the
accomplishment of organizational goals.
Why is control so important?
• Planning can be done, an organizational structure created to facilitate
efficient achievement of goals, and employees motivated through
effective leadership.
• But there’s no assurance that activities are going as planned and that
the goals employees and managers are working toward are, in fact,
being attained.
• Control is important, therefore, because it’s the only way that
managers know whether organizational goals are being met and if
not, the reasons why.
• The value of the control function can be seen in three specific areas:
planning, empowering employees, and protecting the workplace
Why Is Control Important?
• As the final link in management functions:
• Planning
• Controls let managers know whether their goals and plans are on target and what future
actions to take.
• Empowering employees
• Control systems provide managers with information and feedback on employee
performance.
• Protecting the workplace
• Controls enhance physical security and help minimize workplace disruptions.
Exhibit 18-1: Planning-Controlling Link
The Control Process
• The Process of Control
1. Measuring actual performance
2. Comparing actual performance against a standard
3. Taking action to correct deviations or inadequate
standards
Exhibit 18-2: The Control Process
 Step1 Measuring: How and What
We Measure
• Sources of Information (How) • Control Criteria (What)
• Personal observation • Employees
• Statistical reports • Satisfaction
• Turnover
• Oral reports
• Absenteeism
• Written reports
• Budgets
• Costs
• Output
• Sales
Exhibit 18-3: Sources of Information
for Measuring Performance
 Step 2: Comparing Actual Performance
Against the Standard
• Determining the degree of variation between actual performance and
the standard
• Range of variation - the acceptable parameters of variance between
actual performance and the standard.
Exhibit 18-4: Acceptable
Range of Variation
Step 3: Taking Managerial Action
• Immediate corrective action - corrective action that corrects
problems at once in order to get performance back on track.
• Basic corrective action - corrective action that looks at how and why
performance deviated before correcting the source of deviation.
(Training)
Controlling for Organizational Performance
• Organizational performance - the accumulated results of all the
organization’s work activities.
 Measures of Organizational Performance
1. Productivity - the amount of goods or services produced divided by
the inputs needed to generate that output.
2. Organizational effectiveness - a measure of how appropriate
organizational goals are and how well those goals are being met.
3. Industry & Company Rankings - Rankings are a popular way to
measure organization’s performance. Rankings are determined by
specific performance measures and create a equal platform for other
comparable companies.
Types of Control
• Feed forward control - control
that takes place before a work
activity is done.
• Concurrent control - control that
takes place while a work activity
is in progress.
Types of Control (cont.)
• Management by walking
around - a term used to
describe when a manager
is out in the work area
interacting directly with
employees.
• Feedback control - control
that takes place after a
work activity is done.
Exhibit 18-8: Types of Control
What is the Balanced Scorecard?
• Balanced scorecard - a performance measurement tool that examines
more than just the financial perspective.
• Measures a company’s performance in four areas:
• Financial
• Customer
• Internal processes
• People/innovation/growth assets
Information Controls
• Management information system (MIS) - a system used to provide
management with needed information on a regular basis.
• Data - an unorganized collection of raw, unanalyzed facts (e.g., an unsorted list of
customer names).
• Information - data that has been analyzed and organized such that it has value and
relevance to managers.
Benchmarking of Best Practices
• Benchmarking - the search for the best practices among competitors
or non-competitors that lead to their superior performance.
• Benchmark - the standard of excellence to measure and compare
against.
Managerial Decisions
in the Control Process