Management control is the process of ensuring that actual activities conform to planned activities. In fact, control is more pervasive than planning. Control helps managers monitor the effectiveness of their planning their organizing and their activities. An essential part of the control process is taking corrective actions as needed.
Another definition of Management control is a systematic effort to set performance standards with planning objectives, to design information feedback systems, to compare actual performance with these predetermined standards, to determine whether there are any deviations and to measure their significance, and to take any action required to assure that all corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives.
Control is divided into the four steps illustrated. These steps are:
Establish Standards and methods for measuring performance: Ideally, the goals and objectives established during the planning process will already be stated in clear, measurable terms that include specific deadlines. This is important for a number of reasons. First, vaguely worded goals such as ‘to improve employee skills’ are just empty slogans until managers begin to specify what they mean by “improve” and what they intend to do to reach this goal and when. Second, precisely worded goals (such as “improve employee skills by conducting weekly on-site seminars during the slow months of October and March”) are easier to evaluate for accuracy and usefulness than empty slogans. Finally, precisely worded, measurable objectives are easy to communicate and to translate into standards and methods that can be used to measure performance. This ease of communicating precisely worded goals and objectives is especially important for control, since some people usually fulfill the planning roles and other people are assigned to control roles.
In services industries, standards and measurements might include the amount of time customers have to wait in at a bank, the amount of time they have to wait before the telephone is answered, or the number of new clients attracted by a reaped advertising campaign. In an industrial enterprise, standards and measurements could include sales and production targets work attendance goals, waste products produced and recycled and safety records.
Measure the Performance: Like all aspects of control, measurement is an ongoing, repetitive process. The frequency of measurements depends on the type of activity being measured. In a manufacturing plant, levels of gas particles in the air, for example, could be continuously monitored for safety, whereas progress on long term expansion objectives might need to be reviewed by top management only once or twice a year. Similarly the franchise owner at the local McDonald’s might be required to examine customer waiting time on a continual basis. On the other hand, petitions may be put before the California Public Utility Commission only five or six times a year. Still, good managers avoid allowing extended periods to pass between performance measurements.
Determine whether performance matches the standard: In many ways, this is the easiest step in the control process. The complexities presumably have been dealt with in the first two steps. Now it is a matter of comparing measured results with the established targets or standards previously set. If performance matches the standards, managers may assume that “everything is under control”.
Take Corrective Action: This step is necessary if performance falls short of standards and the analysis indicates action is required. The corrective action could involve a change in one or more activities of the organization’s operations. For example, the franchise owner/manager might discover that more counter workers are needed to meet the five minute customer waiting standard set by McDonald’s. On the other hand, controls can (and often do) reveal inappropriate (too high or too low) standards. Under these circumstances, the corrective action could involve a change in the original standards rather than a change in activity. Performance in GM’s Buick division for example might cause management to raise the production target.
Another important point namely, that control is a dynamic process. (Here again, enters the element of time). Unless managers see the control process through to its conclusion, they are merely monitoring performance rather than exercising control. The emphasis should always be on devising constructive ways to bring performance up to standard, rather than on merely identifying past failures.