CONTROLLING

by Kim Justine Tiguilo

What is controlling?
Its the process of monitoring, comparing, and correcting work performance. All
managers should control even if their units are performing as planned because they
cant really know that unless theyve 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. Whether
controls are effective, then, is determined by how well they help employees and
managers achieve their goals.
Controlling is defined as monitoring performance, comparing it with goals, and
taking corrective action as needed.
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
theres 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 its 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.
The second reason controlling is important is because of employee
empowerment. Many managers are reluctant to empower their employees because they
fear something
will go wrong for which they would be held responsible. But an effective control system
can provide information and feedback on employee performance and minimize the
chance of potential problems.
The final reason that managers control is to protect the organization and its
assets. Todays environment brings heightened threats from natural disasters, financial
scandals, work place violence, supply chain disruptions, security breaches, and even
possible terrorist attacks. Managers must protect organizational assets in the event that
any of these things should happen. Comprehensive controls and backup plans will help
assure minimal work disruptions.
The control process is a three-step process of
measuring actual performance, comparing actual
performance against a standard, and taking
managerial action to correct deviations or to address
inadequate standards. The control process assumes
that performance standards already exist, and they do.
Theyre the specific goals created during the planning
process.

Step 1. Measuring Actual Performance

To determine what actual performance is, a
manager must first get information about it.
Thus, the first step in control is measuring.
HOW WE MEASURE. Four approaches used
by managers to measure and report actual
performance are personal observations,
statistical reports, oral reports, and written
reports. The picture on the right summarizes the advantages and drawbacks of each
approach. Most managers use a combination of these approaches.
WHAT WE MEASURE. What is measured is probably more critical to the control
process than how its measured. Why? Because selecting the wrong criteria can create
serious problems. Besides, what is measured often determines what employees will do.
What control criteria might managers use?
Step 2. Comparing Actual Performance against the Standard
The comparing step determines the variation between actual performance and the
standard. Although some variation in performance can be expected in all activities, its
critical to determine an acceptable range of variation. Deviations outside this range
need attention.
Step 3. Taking Managerial Action
Managers can choose among three possible courses of action: do nothing, correct the
actual performance, or revise the standards. Because do nothing is self-explanatory,
lets look at the other two.
CORRECT ACTUAL PERFORMANCE. Sports coaches understand the
importance of correcting actual performance. During a game, theyll often correct a
players actions. But if the problem is recurring or encompasses more than one player,
theyll devote time during practice before the next game to correcting the actions. Thats
what managers need to do as well. Depending on what the problem is, a manager could
take different corrective actions. For instance, if unsatisfactory work is the reason for
performance variations, the manager could correct it by things such as training
programs, disciplinary action, changes in compensation practices, and so forth. One
decision that a manager must make is whether to take immediate corrective action,
which corrects problems at once to get performance back on track, or to use basic
corrective action, which looks at how and why performance deviated before correcting
the source of deviation. Its not unusual for managers to rationalize that they dont have
time to find the source of a problem (basic corrective action) and continue to perpetually
put out fires with immediate corrective action. Effective managers analyze deviations
and if the benefits justify it, take the time to pinpoint and correct the
causes of variance.

REVISE THE STANDARD. Its possible that the variance was a result of an
unrealistic standardtoo low or too high a goal. In that situation, the standard needs the
corrective action, not the performance. If performance consistently exceeds the goal,
then a manager should look at whether the goal is too easy and needs to be raised. On

the other hand, managers must be cautious about revising a standard downward. Its
natural to blame the goal when an employee or a team falls short.
Levels of Control: Strategic, Tactical, & Operational
There are three levels of control, which correspond to the three principal
managerial levels: strategic planning by top managers, tactical planning by middle
managers, and operational planning by first-line (supervisory) managers.
I. Strategic Control by Top Managers Strategic control is monitoring performance
to ensure that strategic plans are being implemented and taking corrective action as
needed. Strategic control is mainly performed by top managers, those at the CEO and
VP levels, who have an organization-wide perspective. Monitoring is accomplished by
reports issued every 3, 6, 12, or more months, although more frequent reports may be
requested if the organization is operating in an uncertain environment.
2. Tactical Control by Middle Managers Tactical control is monitoring performance
to ensure that tactical plans--those at the divisional or departmental level-are being
implemented and taking corrective action as needed. Tactical control is done mainly by
middle managers, those with such titles as "division head," "plant manager," and
"branch sales manager." Reporting is done on a weekly or monthly basis.
3. Operational Control by First-Level Managers Operational control is monitoring
performance to ensure that operational plans-day-to-day goals-are being implemented
and taking corrective action as needed. Operational control is done mainly by first-level
managers, those with titles such as "department head," "team leader," or "supervisor."
Reporting is done on a daily basis. Considerable interaction occurs among the three
levels, with lower-level managers providing information upward and upper-level
managers checking on some of the more critical aspects of plan implementation below
them.

Six Areas of Control

The six areas of organizational control are physical, human, informational,
financial, structural, and cultural.
I. Physical Area The physical area includes buildings, equipment, and tangible
products. Examples: There are equipment controls to monitor the use of computers,
cars, and other machinery. There are inventory-management controls to keep track of
how many products are in stock , how many will be needed, and what their delivery
dates are from suppliers. There are quality controls to make sure that products are
being built according to certain acceptable standards.
2. Human Resources Area The controls used to monitor employees include
personality tests and drug testing for hiring, performance tests during training,
performance evaluations to measure work productivity, and employee surveys to assess
job satisfaction and leadership.
3. Informational Area Production schedules. Sales forecasts. Environmental
impact statements. Analyses of competition. Public relations briefings. All these are
controls on an organization's various information resources.
4. Financial Area Are bills being paid on time? How much money is owed by
customers? How much money is owed to suppliers? Is there enough cash on hand to
meet payroll obligations? What are the debt-repayment schedules? What is the
advertising budget? Clearly, the organization's financial controls are important because
they can affect the preceding three areas.
5. Structural Area How is the organization arranged from a hierarchical or
structural
standpoint? Two examples are bureaucratic control and decentralized control.
Bureaucratic control is an approach to organizational control that is characterized
by use of rules, regulations, and formal authority to guide performance. This form of
control attempts to elicit employee compliance, using strict rules, a rigid hierarchy, welldefined job descriptions, and administrative mechanisms such as budgets, performance
appraisals, and compensation schemes (external rewards to get results). The foremost
example of use of bureaucratic control is perhaps the traditional military organization.
Bureaucratic control works well in organizations in which the tasks are explicit and
certain. While rigid, it can be an effective means of ensuring that performance standards
are being met. However, it may not be effective if people are looking for ways to stay out
of trouble by simply following the rules, or if they try to beat the system by manipulating
performance reports or if they try to actively resist bureaucratic constraints.
Decentralized control is an approach to organizational control that is
characterized by informal and organic structural arrangements, the opposite of
bureaucratic control. This form of control aims to get increased employee commitment,
using the corporate culture, group norms, and workers taking responsibility for their
performance. Decentralized control is found in companies with a relatively flat
organization.

6. Cultural Area The cultural area is an informal method of control. It influences

the work process and levels of performance through the set of norms that develop as a
result of the values and beliefs that constitute an organization's culture. If an
organization's culture values innovation and collaboration, then employees are likely to
be evaluated on the basis of how much they engage in collaborative activities and
enhance or create new products. Example: The biotechnology company Genentech,
which appears every year on Fortune's list of "100 Best Companies to Work For" (no. 16
in 2010, no. 5 in 2008, no. 1 in 2006), is a good example of an organization that
promotes, measures, and rewards employee motivation. For instance, all scientists and
engineers are encouraged to spend
20% of their workweek on pet projects. Genentech's tremendous revenue growth over
the last decade is clearly driven by a set of cultural values, norms, and internal
processes that reinforce creativity.