What is Controlling?
Controlling means validating if the activities occurring are in confirmation with the actual plans prepared and accepted, instructions issued and principles established. The controlling function also helps in the effective and efficient application of enterprise resources in order to accomplish the planned goals. Controlling gauges the deviation of actual performance from the planned performance, establish the causes of such aberrations and helps in adopting corrective actions.
Controlling as a managerial process is associated with ensuring that all the functioning of the business are as per the plans formulated and gives meaning and effect to all other processes of management. Controlling as a function is pervasive and is continuous. The function starts the moment a plan is finalized and formulated and is done across the entire business entity in different ways from the lower levels to the top most one. Being plan based controlling is a function that is inherently goal oriented and clearly involves the understanding of what you want.
According to Brech, “Controlling is a systematic exercise which is called as a process of checking actual performance against the standards or plans with a view to ensure adequate progress and also recording such experience as is gained as a contribution to possible future needs.”
According to Donnell, “Just as a navigator continually takes reading to ensure whether he is relative to a planned action, so should a business manager continually take reading to assure himself that his enterprise is on right course.”
The two primary applications of controlling include facilitation of coordination and further helps in planning.
Importance of Controlling
- Strengthening the Goal Oriented Nature
By virtue of planning a business becomes a goal oriented entity. This goal oriented attitude of the business is maintained and strengthened by the process of controlling. As already elaborated controlling is an extension of the planning process that ensures conformity with the planned agenda. Doing so the process gives out a clear picture that the plans are superior to individual actions and must be followed. This allows the employees to clearly understand what is given more priority and keeps them goal oriented.
- Achieving Goals
Being goal oriented provides an entity let it be a business or not, the advantage of making it easier to achieve goals. When the employees understand the goals and are kept goal oriented their efforts will be directed towards achieving it. If the effort is in a different direction altogether, the process of controlling weeds it out. Thus the process ensures channelizing effort into achieving predetermined goals.
- Optimum Use of Resources
The process of controlling as is evident from the observations above is a strict scrutinizing process that looks into what was done and compares it to how it was done. During such a process the amount or the nature of use of various resources also comes under strict scrutiny. Was that person meant to do that or was that machine supposed to be used instead of this one are probable questions that this process answers. The benefit of answering such questions is that the people using such resources will be more careful in its usage and this leads to a optimum use of resources.
- Facilitates a system of Motivation
A control system is all about scrutinizing what was done with what should have been done. This plays a key role in being a good motivator. By virtue of this process, the employees clearly understand what will be appreciated or even rewarded and what will be discouraged and sometimes punished. Thus the employees are motivated to get rewards and avoid punishments which helps the business fare better and get better results.
- Maintaining Discipline
Similar to being a system of motivation, a good control mechanism also allows for the maintenance of discipline within an business. When there is a clear understanding of what is shunned and what is appreciated the employees will be disciplined in doing what is to be done and will not do those that are shunned, creating a stable and disciplined workforce.
Controlling is thus a very important and integral part of everyday management. It is process that helps in ensuring business success and stability and cannot be separated from the other functions. This is because the effectiveness of planning and all other functions are gauged and understood through the process of controlling.
Steps Involved in Controlling Function of Management
Controlling like most other processes are composed of a number of steps followed in a sequential order. There are 4 steps that are involved in the process of controlling and they are:-
- Establishment of Standards
Standards are benchmarks that we can compare a particular output to. It serves the purpose of being a threshold which has to be achieved or surpassed. The creation and the prior establishment of standards is the first step involved in the process of controlling. The standards are established in accordance to the plan that is developed for the entire organisation. So if the plan is to construct a 5 star hotel in 5 years then a standard that needs to be achieved in the first year could be the creation of the building plan and the accumulation of finance from multiple sources for the commencement of the construction. Thus this acts as a sub goal that needs to achieved or surpassed. Standards may be classified into following:-
- Measurable or Tangible
Standards that be measured and subsequently expressed are called measurable standards. They could be in form of time, cost, output, expenditure, profit, appreciation, growth, market share, user base etc.
- Non-Measurable or Intangible
There standards cannot be measured monetarily. For instance- deviation of workers attitudes, the performance of a manager, etc. These are called as intangible standards.
Controlling is facilitated through the formation of such standards because controlling is practiced only on the basis of such standards.
Ascertainment of Output
The second main step in controlling is the measurement of performance. Gauging deviations from the planned measures is easier for measurable standards of performance as they can be quantified in units, cost, money terms, etc. However, non-measurable or intangible standards of performance are difficult to gauge.
Qualitative assessment becomes a challenge, especially while the performance of manager needs to be measured. Following factors are usually considered while measuring manager’s performance: workers attitude, morale to work, the development in the attitudes regarding the physical environment, and communication with the superiors.
Identification Of Deviations
After the actual output is determined it is compared and contrasted to the standards that we have established. This step is central to the entire process of controlling as the deviations from the plan is identified during this step. Deviations can be referred to all those factors present in the actual output that prove distinct and different from the established standard. Depending upon the nature of distinction, deviations are classified either as Positive or Negative Deviations.
In the above example, if the management was able to get the plans ready, get the finances ready and also get the due permission from the authorities and materials were organised for the commencement of construction, it will be a positive deviation. Positive deviations thus as will be understood from the illustration is when the conditions of the standard are surpassed and the output goes ahead to materialize more factors relevant to the central plan, in this case getting permits and materials. Negative deviations on the other hand refers to a situation when the standard wasn’t even met. In our case it would be the management not being able to procure the finances.
After identifying the deviation, the manager should think about various causes which actually lead to this deviation. The causes may include incorrect planning, coordination lapses, defective implementation, ineffective communication and inefficient supervision etc.
Taking Remedial Actions
Mere identification of deviation will not be of any consequence to a business when it is either incapable or unwilling to take effective remedial actions. Remedial actions would include a sum total of all efforts taken to solve the deviations identified. The main object of remedial actions would be Negative deviations. However positive deviations do come under the ambit of this step. This happens when the management is overdoing itself.
For instance, if the management were to procure furniture for the Hotel too while it was supposed to only make a plan and organize funds then such an act even though positive would not be in the best interest as the furniture will undergo wear and tear by the time the hotel is constructed and let open to the public. However such instances are rare and it is negative deviations that this step is concerned more with. Remedial actions for negative deviation would be changing the approach of the fund mobilizing team, consulting a better and more punctual architect etc.
Last but not least is the step of review or follow up. It involves ensuring that the remedial actions so taken are bearing fruit and are effective. This step would probably involve ensuring that the architect newly hired is giving regular updates, the newly reorganized funding campaign is working in the earnest etc.