Types and functions of management control

The management process consists of five functions: planning, organization, staffing, management and control. Thus, control is part of the management process.

Control is the main objective management function in an organization: the process of comparing actual performance with established company standards. Each manager must monitor and evaluate the activities of his subordinates. Management control helps to take corrective actions on the part of the leader in a timely manner to avoid unforeseen circumstances or financial losses for the company.

The basic control process includes three steps:

• Setting standards.
• Performance measurement in accordance with these standards.
• Correction of deviations from standards and plans.

As part of the organization’s overall strategic plan, managers define goals for units in specific, accurate, operational terms that include planning for performance to compare with actual results.

Standards against which actual performance will be compared can be derived from past experience, statistics, and benchmarking (based on industry best practices). As far as possible, standards are developed on a bilateral basis, and not top management makes decisions unilaterally taking into account the goals of the organization.

Why do we need management control?

If staff always did what was best for the organization, there would be no need for control and management. But it is obvious that sometimes people cannot or do not want to act in the interests of the organization and a set of control measures must be implemented to prevent unwanted behavior and encourage the desired actions.

Even if employees are properly equipped in order to do their job well, some people prefer not to, as the individual goals and goals of the organization may not completely coincide. In other words, no matching goals. In such cases, steps must be taken to increase employee motivation and productivity.

An effective organization is an organization in which managers understand how to manage and control. The purpose of control as a concept and process is to help motivate and guide employees in accordance with their intended roles. An understanding of the process and management control systems is essential to the long-term effectiveness of the organization.

Without enough control systems, disorder and chaos can overwhelm an organization. However, if control systems strangle an organization, it may suffer from a lack of business innovation.

Inadequate control over the implementation of management decisions can lead to a decrease in productivity or an increase in the risk of poor financial results at a minimum. In extreme cases, if productivity is not controlled, the result may be an organizational failure.

Features of an effective management system

An effective business management system is an integrated set of processes and management tools that help to align the company's strategy and annual goals with daily actions, control productivity and initiate corrective actions.

The management control system is a continuous process of increasing efficiency by setting individual and collective goals that correspond to the strategic goals of the organization, planning effectiveness to achieve these goals, analyzing and evaluating progress and developing people's knowledge, skills and abilities. The control system should be focused on results.

An effective management system has the following features:

1. Helps to achieve organizational goals.
2. Facilitates optimal use of resources.
3. Improves overall organization performance.
4. Motivates and enhances the morale of employees.
5. Control also establishes discipline and order.
6. Clearly defined and understandable performance indicators.
7. Provides future planning by revising standards.
8. Strategic goals relate to all levels of the organization.
9. Effective controlling minimizes errors.
10. Strengthening management and employee engagement.
11. Faster achievement of priority goals.

The management control process regulates the activities of companies in such a way that the actual performance is in accordance with a predetermined plan. An effective control system allows managers to avoid circumstances that cause company losses.

18 management control functions

Control in management is any process, tool or system that is installed so that management has the ability to regulate the activities of the company in accordance with its goals.

Controlling is carried out at the lower, middle and upper levels of management. At each level, control will be different: top management will be involved in strategic control, middle management in tactical control, and the lower level in operational control.

The following are the control functions for management decisions:

1. Strategy planning. The process of establishing an action plan to achieve goals.
2. Requirements management. Formally documenting plans as requirements and managing changes to these plans as necessary.
3. Financial control. Monitoring and accounting of the budget of the company.
4. Performance management. The process of agreeing a number of goals with employees and evaluating the effectiveness of their work in comparison with these goals.
5. Work control. Employee monitoring to increase productivity, efficiency and quality of work.
6. Program and project management. Implement changes.
7. Risk control. The repeated process of identifying, analyzing and eliminating risk.
8. Security control. Identification and elimination of security threats, and the implementation of ways to reduce various risks.
9. Compliance Control Implementation of processes, procedures, systems, checks, measurements and reports in accordance with the laws, regulations, standards and internal policies of the organization.
10. Metric and reporting. Calculation and transfer of significant measurements of organizational activity.
11. Benchmarking. The repeated process of comparing the results with the industry sector of the company, competitors or modern best practices.
12. Continuous improvement. The process of measuring work results, improving them and measuring them again.
13. Quality control. Ensuring compliance of output products with specifications. For example, the introduction of a product testing process on a production line.
14. Quality assurance. Quality Assurance is the process of preventing future quality failures. For example, the practice of investigating the root causes of all failures to look for production improvements.
15. Automation. Increase productivity, efficiency and quality through automation.
16. Data management. The practice of collecting information that may be useful in the future, as well as data analysis.
17. Inventory Management. Regulation and stock taking to avoid shortages or surpluses.
18. Asset Management. Control of assets such as manufacturing facilities, infrastructure, machines, software, and intellectual property.

Types of control and their characteristics

Organizations need controls to determine if their plans have been achieved and to take corrective action if necessary. The main goals of monitoring management decisions:

1. Adaptation to change. The control system can predict, track and respond to changing environmental conditions.
2. Minimization of errors. Productive management control and accounting will limit the number of errors that arise in the activities of the company.
3. Cost minimization and profit maximization. If the organization of management control is effectively implemented, it can reduce costs and increase productivity.

Enterprises establish control systems in a number of different areas and at different levels of management. The responsibility for monitoring management decisions is extensive. There are different classifications and characteristics of this management function. One of the most common looks like this:

1. Preliminary control, also known as direct communication control, focuses on the resources that the organization draws from the environment. He controls the quality and quantity of these resources before they enter the organization.
2. Current control focuses on compliance with quality standards and the quantity of the product or service in the conversion process.
3. Final control, also known as feedback control, focuses on the results of the organization after the completion of the transformation process. Although final control may not be as effective as preliminary or ongoing, it may provide management with information for future planning.

According to another classification, control is divided into two broad categories - regulatory and regulatory control, and within these categories there are several types. The types of management control are shown in the following table.

The following sections describe each type and subspecies of control in management activities.

Regulatory control

Regulatory control derives from standard operating procedures, which prompts criticism of this type of management control implementation as obsolete and counterproductive. It implies full and total control over all areas of the organization.

As enterprises have become more flexible in recent years due to the smoothing of the organizational hierarchy and the expansion of borders, critics point out that regulatory control may more likely impede the achievement of the goal. Key from the point of view of controlling the organization of managerial decisions is the conformity of control to organizational goals.

Bureaucratic control

Bureaucratic control stems from the lines of power, which depends on the position in the organizational hierarchy. The higher the level of submission, the more a person will have the right to dictate his policy. Bureaucratic control gained notoriety, and partly fair. Organizations that rely too much on a chain of command competency impede flexibility in the event of unforeseen situations. However, there are ways in which managers can make a company as flexible and capable of quickly responding to customer problems as any other form of management control organization.

How to keep the chain of command, while providing flexibility and quick response in the system? This is exactly the issue that bureaucratic control should solve. One solution is standard operating procedures that delegate hierarchy responsibilities to the company.

Financial control

Financial control governs key financial goals for which managers are responsible. Such management control systems are common among firms organized as multiple strategic business units (SBUs). An SBU is a product, service, or geographic line that has managers who are fully responsible for gains and losses. They are accountable to senior management to achieve financial goals that contribute to the overall profitability of the corporation.

This category of control over management decision-making imposes restrictions on expenses. For managers, an increase in spending should be justified by an increase in revenue. For department managers, staying within the budget is usually one of the key performance indicators.

Thus, the role of financial control is to increase overall profitability, as well as to maintain reasonable costs. To determine what costs are necessary, some firms will compare the results of other firms in the same industry, and then analyze management control. Such a comparative analysis provides data to determine whether costs are consistent with industry averages.

Quality control

Quality control describes the degree of variation of processes or products that is considered acceptable. For some companies, the standard is the absence of defects, that is, the absence of any changes. In other cases, a statistically insignificant deviation is acceptable.

Quality control affects the end result of a product or service offered to customers. When the company constantly maintains excellent quality, customers can rely on the attributes of the product or services of the company, but it also creates an interesting dilemma. Excessive quality control of already manufactured products can reduce the response to the unique needs of customers.

Regulatory control

Instead of relying on standard organizational policies and procedures, as in previous types of controlling, regulatory control manages the behavior of employees and managers through generally accepted patterns of behavior.

Regulatory control decides whether a particular type of behavior is correct and another less appropriate. For example, a tuxedo may be an acceptable outfit for the award ceremony for American businessmen, but it is completely inappropriate at the award ceremony for the Scots, where the formal kilt is more in line with local customs. However, no written code was adopted regarding clothing.

Thus, the difference between the regulatory and regulatory system for controlling management decisions is formality. Regulatory control is an informal management system, in contrast to regulatory.

Team control

Such an organization of control over management decisions has become commonplace in many companies. Team norms are informal rules that make team members aware of their responsibilities to colleagues.

Although the task of the team is usually officially documented, the ways in which process participants interact is usually developed over time when the team goes through growth phases. Even leadership is informally agreed: sometimes an appointed leader may have less influence than an informal leader. If, for example, the informal leader has more experience than the formal leader of the group, team members are likely to turn to the informal leader for instructions that require certain skills or knowledge.

Team standards tend to evolve gradually, but once formed, they can have a strong impact on company behavior.

Organizational control

Norms based on organizational culture are also a type of regulatory control. Organizational culture includes common values, beliefs and rituals of a particular organization. Thus, control of this type consists in the correct harmonization of norms and goals.

Formal and informal management systems

It was mentioned earlier that regulatory control and all its subspecies belong to the formal management system, while normative control refers to the informal one. The table below describes the differences between the two control systems.

, . , . . . , .

, . , . , .

- , .