Managerial Control. Control, Market,Bureaucratic, clan, Strategic Control, Tactical Control,Operational Control

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1 Description of Module Subject Name Paper Name Food Technology Food Business Management Paper No. 14 Module Name/Title Managerial Control Module Id Objectives Keywords FT/FBM/10 To know about the importance of controlling, approaches to control system, levels of control, basic control process, direct and preventive control, types, requirements of effective control Control, Market,Bureaucratic, clan, Strategic Control, Tactical Control,Operational Control Managerial Control The management process is an amalgam of planning, organizing, staffing, leading and controlling. Control is an essential part of management in every organization. The process of controlling involves comparing the actual results with the planned results by ensuring that the planning, organizing, staffing and leading functions result in the attainment of organizational objectives. Control may be defined as the process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations. An effective control system ensures that activities are completed in ways that lead to the attainment of the organization s goals. (I) Importance of Controlling As said above, Controlling is an important part of any management within an organization and the reasons are:

2 Coping with Uncertainty: when an organization establishes its goals, it does so on the basis of the information available at that point of time and by the time the goals are accomplished, many changes might have occurred within the organization or its environment. Therefore, a constant evaluation and revaluation of the organizational plans is necessary to keep up with the changes and cope with the uncertainty and this is done by a properly designed control system. Detecting Irregularities: control systems help managers detect irregularities such as product defects and prevent minor problems to mushroom into major ones and play havoc with the market image of the organization. Identifying Opportunities: Control helps managers identify the opportunities that may pop up in the future. For example, an organization may generate monthly reports that specify items that have high demand and the expense in generating that item. On the basis of these reports, the objectives of the organization may be modified. Handling Complex Situations: when an organization grows and produces a range of products For example Sunfeast, ITC, and operates in a large market area with many competitors then in such cases the managers have to look into the effective coordination of various activities and this can be brought about implementation of a control system. Decentralizing Authority: with a control system in place, managers can allow their subordinates to take decisions while the ultimate authority remains in their hands. Reducing Costs: when implemented carefully, a control system helps in reducing the overall cost and shoots up the output of the company, eliminate wastes and lower labor costs.

3 (II) Approaches to Control systems There are 3 types of approaches to control systems and these are: Market: this type of system uses external market mechanism such as price competition and relative market shares, to establish standards used in systems to gain competitive advantage. Bureaucratic: emphasizes organizational authority of administrative and hierarchical mechanisms to ensure appropriate employee behaviors and to meet performance standards. Clan: Regulates employee behavior by the shared values, norms, traditions, rituals, beliefs and other aspects of organization s cultures. (III) Levels of Control For every managerial level, there are separate planning and controlling responsibilities and they are categorized as under: Strategic Control: it involves taking and implementing measures to ensure that the strategic plans progress in the same way as intended. It is generally a concern for the top level managers as they usually view things from the point of view of deriving benefits for the organization. These managers may also exercise tactical or operational control in order to ensure that the strategic plans are implemented successfully in the organization. Tactical Control: this is exercised by middle level managers who are concerned with department level goals and objectives to focus on assessing implementation of the tactical plans. They can also exercise operational control as well as are involved in strategic control as they act as potent sources of information to the top level managers on strategic issues. Operational Control: this level deals with implementation of the operational plans and is the main concern of low-level managers.

4 A perfect integration of all the three levels of control is essential to ensure effective control within an organization. (IV) Basic Control Process The control process can be divided into 4 major steps and these are illustrated in the figure: (Ref: ) Step 1Establishment of performance objectives and standards: standards are the criteria on the basis of which the employee performance is evaluated and hence constitute a major part of the control process. Establishing standards helps employees understand what is expected out of them, help them understand their personal limitations and reduce the deviation between employee goal and organizational goals. Standards can be divisible into: Output standards: Measure performance results in terms of quantity, quality, cost, or time Input standards: Measure effort in terms of amount of work expended in task performance

5 Step 2 Measurement of actual performance: this is decided by the manager as to how he wants to measure the actual performance of the employees and at what frequency is it necessary to do so. Generally it is done in the early stages so that if any deviations are encountered from the standards, the corrective action can be implemented immediately. Step 3 Comparing actual performance with objectives and standards: Such a comparison enables managers to determine whether the actual performance varies from the predetermined standards and to what degree. The need for action is reflected by the difference between the desired and actual performance. Step 4 Taking necessary action. This is done when a significant discrepancy exists between desired and actual performance. Managers must first identify the cause of deviation from the standard, then take the necessary corrective action to rectify the problem. (V) Direct control and Preventive Control The ultimate success of any plan depends on the individuals who implement them. For example, a manufacturing unit producing inferior products cannot adopt a control system of directing inferior products to the scrap heap. In such a case, the individual responsible for taking the incorrect decision is the sole cause of deviations. Therefore direct control and preventive control are the two methods suggested so that such individuals are able to modify their future actions. Direct Control: in this, the cause of the unsatisfactory outcome is traced back to the individuals responsible for it and they are made to correct their practices. For example: in a milk processing plant, if an individual decides that the pasteurization temperature should be increased by, say 5 C, it will affect the nutritive as well as the organoleptic properties of milk, then under direct control the person responsible for taking such a decision is traced back and is made to correct his actions.

6 Preventive Control: focuses on developing better managers who skillfully apply concepts, principles and techniques so that the undesirable outcomes are eliminated completely i.e. higher the quality of the managers and their subordinates, less will be the need for direct control. (VI) Types of Controls Control can be divided into different types and these are: Controls based on timing: on the basis of timing, the controls can be divided into three types: (Ref: ) Feedforward control:a control that prevents anticipated problems before actual occurrences of the problem. Concurrent control:a control that takes place while the monitored activity is in progress.sometimes called steering controls, they monitor ongoing operations and activities to make sure that things are being done correctly

7 Feedback control: A control that takes place after an activity is done. Corrective action is after-the-fact, when the problem has already occurred.they focus on end results, as opposed to inputs and activities. Multiple controls: multiple control systems use two or more control processes and are necessary to cater to the need of different phases of a firm s operations. Control based on degree of human discretion required Cybernetic Control system: It is a self regulating control system which once put into action, can automatically monitor the situation and take corrective action when necessary, thus preventing any kind of human intervention. Non-cybernetic control system: This type of control system relies on human discretion i.e. managerial discretion is required to determine when and what corrective actions are to be taken when the practical output differs from the standards. (VII) Requirements for effective controls Effective control system must have the following characteristics: Should reflect plans, positions and structures: control systems should provide managers relevant information about the progress of the plans; they should be specific to positions/ levels of authority within an organization; and controls must be designed keeping the organization structures in mind i.e. they should clearly indicate the individual with whom lies the responsibility of the execution of plans within an organization. Should be understandable: the control systems must be easy to understand. Therefore, it is advisable to develop systems that are less complex and provide moderate benefits than to have a highly complex system that is difficult to understand by the managers.

8 Should be cost-effective: the benefits derived from the control system must outweigh the cost required to implement them, only then can it be called as a cost effective system. Should be flexible: control systems must be flexible to accommodate changes that may crop up within an organization after their implementation. Should provide accurate information: for effective implementation of the control system, it is essential that accurate information must be provided regarding the performance of the organization.