MANAGERIAL

CONTROL

MANAGERIAL CONTROL
Introduction
a.Control is the last functional chain in the management process.
b.Managers can determine whether organizational goals have
been successfully achieved or otherwise.
Definition of Managerial Control
1.According to Stoner, Freeman, and Gilbert (1995), managerial
control is a process to ensure that actual activities are conducted
according to the planned activities.
2.According to Mockler, control is define as a systematic effort
in determining a set of performance standards based on the
objective of planning the formation of a feedback system, and
the comparison between the actual performance and the set
standards.

3. According to Robbins and Coutler (1996),

control is a process to ensure activities are
implemented as planned and activities that
are considered to be incorrect are corrected.
4. As a whole, managerial control is a process
whereby managers ensure that actual
activities are conducted in line with the
plannec activities and take corrective action
to correct any mistakes that occur in order to
achieve organizational goals.

Concepts in control
1.Cost is one of aspects that managers attempt to
control. Managers may either bear high cost or fail in
achieving organizational goals.
2.All managers must involve themselves in the
organizations control function.
3.Every organization practices a different control
system in achieve its goals.
4.Managers always emphasize two aspects of control
in order to ensure a high level of employee
performance and the achievement of organizational
goals. There are two aspects of control in an
organization.

a) Output control / performance control

i. This control is used to determine the actual performance
or results exhibited by employees in an organization.
ii. Output control is measured by taking into account three
aspects
- Efficiency
- Quality
- Feedback
b) Bahaviour control
- Performed to ensure employee behavior is in accordance to
what is desired by the organization.control is
implemented so that organizations do not face
problematic employees or employees who show
undesired behavior such as being absent, lazy, tardy,

5. Managers must use the following techniques to

implement both these control
a. Budget to measure the organizations financial
performance
b. Quality control to control employee behavior
c. Self-evaluation by managers
d. Financial statement

Relationship Between Managerial Control and Planning

1.Manager who do not perform managerial control will

not know whether the organizational goals and plans have
been achieved or whether corrective action.
2.Control measures the progress of goals which are
achieved and enable managers to detect the level of
quality and weakness in planning in order to take
corrective action before it is too late.
3.Managers must understand the roles of control and
planning in order for both function to work effectively.

Importance of Control
1.There are four important factors related to the importance of
control in an organization as follows:
a. Internal and external changes in organization
- An organization tends to change due to internal and
external changes in the organization.
- Example of internal changes : an organization are
changes in rules and the organization structure.
- Examples of external changes : an organization are
the increase in the production and labour costs,
changes in consumers taste and the introduction of
new products in the market.

b. Organizations size and decentralization

- The organizations growth in size will increase the
number of employees and job. The managers duty to
supervise the increasing number of employees will
become difficult. Thus, control is needed to ensure that
all activities run smoothly and there is not overlapping of
tasks.
- Decentralization in an organization also requires control
to be performed in order to avoid the abuse of power.
c. Mistakes
- Employees can make mistakes, managers can correct these
mistakes before it become serious

d. Allocation of power and responsibilities

- Although managers allocate their power and responsibilities
to the employees, they are still responsible for each tasks
performed by the employees.
- Managers should monitors the duties performed by each
employee in order to ensure the duties are completed in
accordance to the established organizational goals.

The Control Process

Set the standards

Measure the actual performance

Compare the actual performance with the standard

Take corrective action

a. Set the standards

Involves the formation of standards for each management
activity such as sales and production target, attendance
of employees, and safety records.
The factors that need to be considered in setting standards
are as follows :
~ must not be high or too low.
~ must be of quality
~ must be clear and accepted by every employee involved
in achieving the
standards.

b. Measure the actual performance

- The measurement of performance is a repetitive process
just like control.
- Managers must measure their employees performance
continuously in order to ensure that no mistakes occur
while the activities are implemented.

c. Compare the actual performance with the standard

- After the actual performance is evaluated, managers
need to compare the actual performance with the
established standards to identify whether the actual
performance has met the standards.
- If the standards are met, the activities were conducted
as planned and if the standards are not met, mistakes
might have occoured and corrective action must be
taken promptly to amend those mistakes.
d. Take corrective action
If the standards are not met, managers must identify the
cause of the situation.
Corrective action involves changes to one or several
activities in the organizational operations.

Effective Control Principle

In an organization, there are several principle that determine the
effectiveness of a control process as follows :
a. Flexibility
Control activities require flexibility and should be adjustable from
time to time according to changes in the environment.
b. Accuracy of information
Managers must obtain correct, valid, accurate and trustworthy
information. Also must explain to employees what must be done
and what has been done.
c. Timeliness
Information must be delivered at the right time and at a suitable
place.

d. Focus on important factors

Controlled activities must only comprise important activities and
focus should be given to either the performance aspects or the
employee aspect.
e. Acceptance by employees
An aspects that is controlled must obtain consensus from all the
employees in the organization. All employees must adhere to
policy organization.

Characterictics of effective control

There are several characterictics which depict an effective
control system, as follows:
a)Accurate information
Information obtained must be accurate, measurable, and
comparable to the standards. The accuracy of information
received by employees is important to rectify the problems.
b)Comprehensive objectives.
The established objactives must be understood by the
individuals assigned to achieve it. A control system that is
difficult to understand can cause undesired mistakes to occur.

c) Timeliness.
Control must be conducted at the suitable and right time in
order to bring progress to the organization.
d) Easy to operate
An effective control system should be able to detect any
irregularities that occur in a quick and easy manner so that
corrective action can be taken promptly.
e) Economical
The implementation of a control system must be economical,
logical, and realistic in terms of cost.

f) Flexible
The control system must be flexible in order for
organizations to grab new opportunities and act promptly to
any changes that accur.
g) Acceptance by employees
The implementation of a control system must have certain
meaning and goals so that it can be easily understood and
accepted by all the employees.

Problems in forming figid and flexible control system

1.The right level of control is needed because controls that are
rigid or flexible can bring a negative impact to the organization.
Rigid control system

Flexible control system

1. Employees become rebellious.

1. Employees perform their tasks

half- heartedly.

2. Employees will face pressure.

2. Employees discipline will

decline.

3. Low productivity.

3. Low productivity.

4. Relationship between employees

and managers will be affected
due to limited communication.

4. Wastage of resources.

5. Job performance will decline.

5. Job performance will decline.

3. These problems must be eliminated as it can obstruct the

achievement of organizational goals. Nonetheless, managers
always face difficulties in determing the types of problem that
really exists.
4. An example of a problem that might occur in a control system is
ineffective control of resources. A chronic financial problem may
cause the organization to reduce its
workforce and the
quantity of product and services offered in order to save costs.
Some organizations face human resource problems, caused by
employees who ar not able to work diligently or when there are
too many employees in an organization.
5. It would be difficult to control a large number of employes might
take advantage of this situation to be absent or late to work.
Dissatisfaction of employees towards the management will cause
employees to be lazy, rebellious, and work half-heartedly.

Types of control
There are four basic types of control:
a.Feedforward control
b.Concurrent control
c.Filtering yes/no control
d.Feedback control
a.Feedforward control
1.Feedforward control is performed before an activity starts.
2.Managers who conduct feedforward control are usually
involved in making policies, procedures, and rules to eliminate
any undesired behaviours.

3. The objective of feedforward control is to avoid mistakes that

occur before the activity is implemented.
4. The advantage of feedforward control is that the management
can avoid any problems or ,mistakes from accurring.
b.Concurrent control
1.Concurrent or steering control is performed during the
implementation of a job or activity.
2.Since control is conducted while the activity is being implemented,
management can take action promptly to correct the mistakes that
occur before it becomes serious. This can reduce the cost of taking
corrective action.
3.Concurrent control is not only conducted on employees'
performance, but it is also conducted on human and non-human
resources such as equipment, machinery, and the office layout

4. Concurrent control is more effective if managers obtain

accurate information regardinng environmental changes and the
development of desired organizational goals at the right time.
5. Concurrent control enables managers to grab unexpected
opportunities.
c. Filtering or yes/no control
1. Filtering or yes/no control involves a filtering proces, whereby
certain procedures must be approved before an operation is
continued.
2. Filtering control is usually performed after the organization
implements the activity and the results are obtained.
3. Managers will take corrective action after seeing the
organizations achievement in a certain period.
4. Filtering control is important and it is performed widely
compared to other type of controls.

Feedback control
1.The objective of feedback control is to
measure the results of an action.
2.Through feedback control, any source of
weaknesses in plans or standards can be
identified.
3.This control is also used as the basis for
giving rewards or motivating employees.

Control techniques
1.Managers practice various control
techniques and systems to handle different
problems in an organization.
2.Financial control is widely used because
information can be measured and
compared easily. The financial control
techniques are financial statements, audit,
and budget.

Financial control techniques

Financial statements
1.Financial statements are used to calculate the
financial value of an organizations internal and
external products and services. Financial
statements are usually used to measure the
following aspects:
a) Liquidity position ability to turn assets into
cash in order to meet the organizations current
financial needs or obligations.
b)Long term liability and equity position.
c)Profitability position ability to earn a profit in
a certain time period of time.

2. The financial statements of an organization comprise

three main statements, that is the break-even analysis,

balance sheet , and the funds flow statements.
a)Break-even analysis
i.The break- even analysis is used to study the
relationship between sales or revenues and costs and
determine the break-even point whereby total sales will
be equal to total costs.
ii.The difference between total sales ( total revenue )
and total cost ( total expenditure ) is the profit or loss
earned by the organization in a certain time period.

iii) Management can use the break-even analysis to answer these

questions:
Is the expected sales volume of products or services sufficient to
achieve the break-even point?
Based on the forecasted sales volume and price, what is the lowest
variable cost required to achieve the break-even point?
What is the lowest fixed cost needed to achieve the break-even
point?
How the sales price influences the break-even volume?
iv) Organization can use the above information to forecast
profitability, control expenditure, plan marketing activities, and
select profitable projects.
v) The break-even point in the break-even analysis can be determined
by using graphical and algebraic methods.

b) Balance sheet
Balance sheet provides a snapshot of the organizations
investment in assets and the financial resources used to finance
these assets. In summary, balance sheet shows the organizations
financial position on the last date of the financial period.
c) Funds flow statement
Funds flow statement report the organizations sources and
usage of funds for a certain financial period. Funds are defined
as a group of cash. Through this statement, managers will be
able to determine the inflow and outflow of the business for a
specific financial period.

AUDIT
1.Audit is the proses of analysing and identifiying details that
have mistakes, correcting the mistakes, and updating the
financial statements after taking into account the mistakes.
2.Usually, audit will be conducted by external auditors who
do not have any interest in the organization.

Budget
1.Budget is a quantitative statement stated in monetary value. It
describes the managements plans to achieve certain objectives
in a given time frame.
2.Budgets prepared by each unit or division are known as
component budgets. Component budgets can be divided into
operational budgets and financial budgets.
3.Operational budgets comprise budgeting statement such as the
sales budget, the direct material budget, and the production
budget.
4.Budgets can be prepared in a fixed or flexible format. In fixed
budgets, estimates are based on a single level of activity. In
flexible budgets,estimates are based on several levels of
activities.

Traditional Non-Financial Control Techniques

Statistical Data
1.Data usually exists in the form of facts,figures and events.
2.Statistical data is data obtained in the form of figures.
3.Controls are made on statistical information to ensure that
organizational goals can be achieved.
Special Report and Analysis
1.The wide usage of computer in organizations encourages
managers to use statistical report to measure the actual
performance.
2.Statistical reports not only cover computer outputs, but also
include graphs, charts, and figures in any form that can be used
by managers to evaluate performance.

Internal Operation Audit

1.Audit is a prosess of verifiying the organizations financial
statements and records by an external party or employees who
possess relevant qualifications.
2.There are two types of audit: (a) internal operation audit (b)
external operation audit.
3.External operation audit is performed by qualified external
officers to evaluate the effectiveness of the organizations
control system.

Self-Evalution by Managers
1. The collection and dissemination of the organizations
information is important in ensuring the success of control
process.
2. Managers will face difficulties in controlling organizational
activities and performances without an effective control
system which manages the collection and dissemination of
information.

Modern Non Financial Control Techniques

Gantt Chart
1.Henry Gantt (1861-1919) created the Gantt Chart in order to
control the progress of projects easily.
2.Gantts work is taken from the Taylor Incentive System, a
result of his cooperation with Taylor in several projects.
3.The shedule of the whole project is created by setting the
starting time and the completion time for each activity in the
project.

Milestones Budget
1.Milestones refer to the date set to determine the target
deadline to make non-financial control decisions.
2.Milestones provide a formal re-evaluation of information
whereby the costs, progress, and requirement to re-plan or
modify the schedule can be evaluated.
3.The Gantt Chart shows the relationship of milestones for
similar tasks in the period.

Programme Evaluation and Review Technique/Critical

Path Analysis
1.The relationship between activities that must be performed in
order to complete a project is not shown in the chart.
2.The milestones budget is used to divide big projects into subactivities to enable managers to conduct control easily.
3.Both CPM analysis and PERT techniques were developed
separately, they were used to control the United States of
Americas defence system.
4.PERT was used for the first time in 1958 by the United States
of Americas Navys to plan and control the project of building
the Polaris missile.

The PERT/CPM analysis can also be used for constrution

projects such as highways, dams, oil pipelines or bridges,
installation or computer system, introduction of new products,
and new housing projects.

~The end~
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