PARISHKRIT AGRAWAL @ BIT

Organizational Control Objectives

Simply put, organizational control is the process of assigning, evaluating, and regulating resources on an ongoing
basis to accomplish an organization's goals. To successfully control an organization, managers need to not only know
what the performance standards are, but also figure out how to share that information with employees.
Control can be defined narrowly as the process a manager takes to assure that actual performance conforms to the
organization's plan, or more broadly as anything that regulates the process or activity of an organization. The
following content follows the general interpretation by defining managerial control as monitoring performance
against a plan and then making adjustments either in the plan or in operations as necessary.

The six major purposes of controls are as follows:

Controls make plans effective. Managers need to measure progress, offer feedback, and direct their teams if
they want to succeed.
Controls make sure that organizational activities are consistent. Policies and procedures help ensure that
efforts are integrated.
Controls make organizations effective. Organizations need controls in place if they want to achieve and
accomplish their objectives.
Controls make organizations efficient. Efficiency probably depends more on controls than any other
management function.
Controls provide feedback on project status. Not only do they measure progress, but controls also provide
feedback to participants as well. Feedback influences behavior and is an essential ingredient in the control
process.
Controls aid in decision making. The ultimate purpose of controls is to help managers make better decisions.
Controls make managers aware of problems and give them information that is necessary for decision making.

Many people assert that as the nature of organizations has changed, so must the nature of management controls. New
forms of organizations, such as self-organizing organizations, self-managed teams, and network organizations, allow
organizations to be more responsive and adaptable in today's rapidly changing world. These forms also cultivate
empowerment among employees, much more so than the hierarchical organizations of the past.
Some people even claim that management shouldn't exercise any form of control whatsoever, and should only support
employee efforts to be fully productive members of organizations and communities. Along those same lines, some
experts even use the word “coordinating” in place of “controlling” to avoid sounding coercive. However, some forms
of controls must exist for an organization to exist. For an organization to exist, it needs some goal or purpose, or it
isn't an organization at all. Individual behaviors, group behaviors, and all organizational performance must be in line
with the strategic focus of the organization.

Controlling as a management function involves following steps:

1. Establishment of standards- Standards are the plans or the targets which have to be achieved in the course of
business function. They can also be called as the criterions for judging the performance. Standards generally
are classified into two-
a. Measurable or tangible - Those standards which can be measured and expressed are called as
measurable standards. They can be in form of cost, output, expenditure, time, profit, etc.
b. Non-measurable or intangible- There are standards which cannot be measured monetarily. For
example- performance of a manager, deviation of workers, their attitudes towards a concern. These
are called as intangible standards.
Controlling becomes easy through establishment of these standards because controlling is exercised
on the basis of these standards.
2. Measurement of performance- The second major step in controlling is to measure the performance. Finding
out deviations becomes easy through measuring the actual performance. Performance levels are sometimes
easy to measure and sometimes difficult. Measurement of tangible standards is easy as it can be expressed in
units, cost, money terms, etc. Quantitative measurement becomes difficult when performance of manager has
to be measured. Performance of a manager cannot be measured in quantities. It can be measured only by-
a. Attitude of the workers,
b. Their morale to work,
c. The development in the attitudes regarding the physical environment, and
d. Their communication with the superiors.
It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.
3. Comparison of actual and standard performance- Comparison of actual performance with the planned
targets is very important. Deviation can be defined as the gap between actual performance and the planned
targets. The manager has to find out two things here- extent of deviation and cause of deviation. Extent of
 PARISHKRIT AGRAWAL @ BIT
deviation means that the manager has to find out whether the deviation is positive or negative or whether the
actual performance is in conformity with the planned performance. The managers have to exercise control by
exception. He has to find out those deviations which are critical and important for business. Minor deviations
have to be ignored. Major deviations like replacement of machinery, appointment of workers, quality of raw
material, rate of profits, etc. should be looked upon consciously. Therefore it is said, “ If a manager controls
everything, he ends up controlling nothing.” For example, if stationery charges increase by a minor 5 to 10%,
it can be called as a minor deviation. On the other hand, if monthly production decreases continuously, it is
called as major deviation.
Once the deviation is identified, a manager has to think about various cause which has led to deviation.
The causes can be-
a. Erroneous planning,
b. Co-ordination loosens,
c. Implementation of plans is defective, and
d. Supervision and communication is ineffective, etc.
4. Taking remedial actions- Once the causes and extent of deviations are known, the manager has to detect
those errors and take remedial measures for it. There are two alternatives here-
a. Taking corrective measures for deviations which have occurred; and
b. After taking the corrective measures, if the actual performance is not in conformity with plans, the
manager can revise the targets. It is here the controlling process comes to an end. Follow up is an
important step because it is only through taking corrective measures, a manager can exercise
controlling.

Planning and controlling are two separate fuctions of management, yet they are closely related. The scope of activities
if both are overlapping to each other. Without the basis of planning, controlling activities becomes baseless and
without controlling, planning becomes a meaningless exercise. In absense of controlling, no purpose can be served by.
Therefore, planning and controlling reinforce each other. According to Billy Goetz, " Relationship between the two
can be summarized in the following points
1. Planning preceeds controlling and controlling succeeds planning.
2. Planning and controlling are inseperable functions of management.
3. Activities are put on rails by planning and they are kept at right place through controlling.
4. The process of planning and controlling works on Systems Approach which is as follows :
Planning → Results → Corrective Action
Planning and controlling are integral parts of an organization as both are important for smooth running of an
enterprise.
5. Planning and controlling reinforce each other. Each drives the other function of management.

Types of Organizational Controls

Control can focus on events before, during, or after a process. For example, a local automobile dealer can focus on
activities before, during, or after sales of new cars. Careful inspection of new cars and cautious selection of sales
employees are ways to ensure high quality or profitable sales even before those sales take place. Monitoring how
salespeople act with customers is a control during the sales task. Counting the number of new cars sold during the
month and telephoning buyers about their satisfaction with sales transactions are controls after sales have occurred.
These types of controls are formally called feedforward, concurrent, and feedback, respectively.
Feedforward controls, sometimes called preliminary or preventive controls, attempt to identify and prevent
deviations in the standards before they occur. Feedforward controls focus on human, material, and financial
resources within the organization. These controls are evident in the selection and hiring of new employees.
For example, organizations attempt to improve the likelihood that employees will perform up to standards by
identifying the necessary job skills and by using tests and other screening devices to hire people with those
skills.
Concurrent controls monitor ongoing employee activity to ensure consistency with quality standards. These
controls rely on performance standards, rules, and regulations for guiding employee tasks and behaviors. Their
purpose is to ensure that work activities produce the desired results. As an example, many manufacturing
operations include devices that measure whether the items being produced meet quality standards. Employees
monitor the measurements; if they see that standards are not being met in some area, they make a correction
themselves or let a manager know that a problem is occurring.
Feedback controls involve reviewing information to determine whether performance meets established
standards. For example, suppose that an organization establishes a goal of increasing its profit by 12 percent
next year. To ensure that this goal is reached, the organization must monitor its profit on a monthly basis.
 PARISHKRIT AGRAWAL @ BIT
After three months, if profit has increased by 3 percent, management might assume that plans are going
according to schedule.

Effective Organizational Control Systems

The management of any organization must develop a control system tailored to its organization's goals and
resources. Effective control systems share several common characteristics. These characteristics are as follows:
A focus on critical points. For example, controls are applied where failure cannot be tolerated or where costs
cannot exceed a certain amount. The critical points include all the areas of an organization's operations that
directly affect the success of its key operations.
Integration into established processes. Controls must function harmoniously within these processes and
should not bottleneck operations.
Acceptance by employees. Employee involvement in the design of controls can increase acceptance.
Availability of information when needed. Deadlines, time needed to complete the project, costs associated
with the project, and priority needs are apparent in these criteria. Costs are frequently attributed to time
shortcomings or failures.
Economic feasibility. Effective control systems answer questions such as, “How much does it cost?” “What
will it save?” or “What are the returns on the investment?” In short, comparison of the costs to the benefits
ensures that the benefits of controls outweigh the costs.
Accuracy. Effective control systems provide factual information that's useful, reliable, valid, and consistent.
Comprehensibility. Controls must be simple and easy to understand.

Advantages

1. Control improves Goodwill Quality control improves the quality of the products. Cost control decreases the cost
of the products. Therefore, the organisation can supply good quality products at lower prices. This increases the
goodwill of the organisation.
2. Control minimises Wastage Control helps to reduce the wastage of human, material and financial resources. This
increases the profits of the organisation.
3. Control ensures optimum utilisation of resources Control helps the organisation to make optimum utilisation of
the available resources. This also increases the profit of the organisation.
4. Control helps to fix responsibility Control helps to fix responsibility of a particular job on a particular person or a
particular department. So, if there are any mistakes then a particular person or a particular department will be held
responsible for it.
5. Control guides operations Control fixes certain standards. All the work has to be done according to these
standards. So control, acts like a traffic signal. It guides all the operations of the organisation in the right direction.
6. Control motivates employees In control, the employees' performances are evaluated regularly. Those who show
good performances are rewarded by giving them promotions, cash prizes, etc. This motivates the employees to work
hard, and it also improves their morale.
7. Control minimises deviations Control minimises the deviations between a planned performance and actual
performance.
8. Control facilitates Delegation. Control helps the superiors to evaluate the work of their subordinates. So, the
superior can concentrate on the very important work, and they can delegate the less important work to their
subordinates. Thus, it facilitates delegation.
9. Control facilitates Co-ordination Control facilitates co-ordination between the different departments of the
organisation. Whenever, there are any deviations, different departments come together to take collective and
corrective steps.
10. Control increases efficiency Efficiency is the relation between returns and cost. If there is a high return at low
cost then there is efficiency and vice-versa. Control leads to high returns and low cost. Therefore, it increases
efficiency.

Control Techniques

1. Direct Supervision and Observation 'Direct Supervision and Observation' is the oldest technique of controlling.
The supervisor himself observes the employees and their work. This brings him in direct contact with the workers. So,
many problems are solved during supervision. The supervisor gets first hand information, and he has better
understanding with the workers. This technique is most suitable for a small-sized business.
 PARISHKRIT AGRAWAL @ BIT
2. Financial Statements All business organisations prepare Profit and Loss Account. It gives a summary of the
income and expenses for a specified period. They also prepare Balance Sheet, which shows the financial position of
the organisation at the end of the specified period. Financial statements are used to control the organisation. The
figures of the current year can be compared with the previous year's figures. They can also be compared with the
figures of other similar organisations.
Ratio analysis can be used to find out and analyse the financial statements. Ratio analysis helps to understand the
profitability, liquidity and solvency position of the business.

3. Budgetary Control A budget is a planning and controlling device. Budgetary control is a technique of managerial
control through budgets. It is the essence of financial control. Budgetary control is done for all aspects of a business
such as income, expenditure, production, capital and revenue. Budgetary control is done by the budget committee. A
budget, in reality, is both a planning tool and a control mechanism. Budget development processes vary among
organizations according to who does the budgeting and how the financial resources are allocated. Some budget
development methods are as follows:
Top-down budgeting. Managers prepare the budget and send it to subordinates.
Bottom-up budgeting. Figures come from the lower levels and are adjusted and coordinated as they move up
the hierarchy.
Zero-based budgeting. Managers develop each new budget by justifying the projected allocation against its
contribution to departmental or organizational goals.
Flexible budgeting. Any budget exercise can incorporate flexible budgets, which set “meet or beat” standards
that can be compared to expenditures.

4. Break Even Analysis Break Even Analysis or Break Even Point is the point of no profit, no loss. For e.g. When an
organisation sells 50K cars it will break even. It means that, any sale below this point will cause losses and any sale
above this point will earn profits. The Break-even analysis acts as a control device. It helps to find out the company's
performance. So the company can take collective action to improve its performance in the future. Break-even analysis
is a simple control tool.

5. Return on Investment (ROI) Investment consists of fixed assets and working capital used in business. Profit on
the investment is a reward for risk taking. If the ROI is high then the financial performance of a business is good and
vice-versa. ROI is a tool to improve financial performance. It helps the business to compare its present performance
with that of previous years' performance. It helps to conduct inter-firm comparisons. It also shows the areas where
corrective actions are needed.

6. Management by Objectives (MBO) MBO facilitates planning and control. It must fulfill following requirements :-
1. Objectives for individuals are jointly fixed by the superior and the subordinate.
2. Periodic evaluation and regular feedback to evaluate individual performance.
3. Achievement of objectives brings rewards to individuals.
7. Management Audit Management Audit is an evaluation of the management as a whole. It critically examines the
full management process, i.e. planning, organising, directing, and controlling. It finds out the efficiency of the
management. To check the efficiency of the management, the company's plans, objectives, policies, procedures,
personnel relations and systems of control are examined very carefully. Management auditing is conducted by a team
of experts. They collect data from past records, members of management, clients and employees. The data is analysed
and conclusions are drawn about managerial performance and efficiency.

8. Management Information System (MIS) In order to control the organisation properly the management needs
accurate information. They need information about the internal working of the organisation and also about the external
environment. Information is collected continuously to identify problems and find out solutions. MIScollects data,
processes it and provides it to the managers. MIS may be manual or computerised. With MIS, managers can delegate
authority to subordinates without losing control.
 PARISHKRIT AGRAWAL @ BIT
9. PERT and CPM Techniques. Programme Evaluation and Review Technique (PERT) and Critical Path Method
(CPM) techniques were developed in USA in the late 50's. Any programme consists of various activities and sub-
activities. Successful completion of any activity depends upon doing the work in a given sequence and in a given time.
CPM / PERT can be used to minimise the total time or the total cost required to perform the total operations.
Importance is given to identifying the critical activities. Critical activities are those which have to be completed on
time otherwise the full project will be delayed.
So, in these techniques, the job is divided into various activities / sub-activities. From these activities, the critical
activities are identified. More importance is given to completion of these critical activities. So, by controlling the time
of the critical activities, the total time and cost of the job are minimised.

10. Self-Control Self-Control means self-directed control. A person is given freedom to set his own targets, evaluate
his own performance and take corrective measures as and when required. Self-control is especially required for top
level managers because they do not like external control.
The subordinates must be encouraged to use self-control because it is not good for the superior to control each and
everything. However, self-control does not mean no control by the superiors. The superiors must control the important
activities of the subordinates.

11. Responsibility accounting is an underlying concept of accounting performance measurement systems. The basic
idea is that large diversified organizations are difficult, if not impossible to manage as a single segment, thus they
must be decentralized or separated into manageable parts. These parts, or segments are referred to as responsibility
centers that include: 1) revenue centers, 2) cost centers, 3) profit centers and 4) investment centers. This approach
allows responsibility to be assigned to the segment managers that have the greatest amount of influence over the key
elements to be managed. These elements include revenue for a revenue center (a segment that mainly generates
revenue with relatively little costs), costs for a cost center (a segment that generates costs, but no revenue), a measure
of profitability for a profit center (a segment that generates both revenue and costs) and return on investment (ROI) for
an investment center (a segment such as a division of a company where the manager controls the acquisition and
utilization of assets, as well as revenue and costs).

Management by Exception

Perhaps the most fundamental of all control techniques is management by exception (MBE), a control principle which
suggests that managers should be informed of situation only if control data show a significant deviation from
standards.

The use of MBE results in two advantages for organizations:

First, it means a better use of the manager's time. Particularly, use of MBE with computers, helps managers save time
by bringing to their attention only those conditions that appear to need managerial action.
Second, MBE encourages workers to exercise judgment when doing their work. As long as they are within the
guidelines that have been established, they can continue working as they see fit.
Therefore, management by exception is both a motivational and control techniques.

INFORMATION MANAGEMENT
What is information management? Information management (IM) is the harnessing of the information resources
and information capabilities of the organization in order to add and create value both for itself and for its clients or
customers. Information management is the management of organizational processes and systems that acquire, create,
organize, distribute, and use information. We adopt a process view of information management. In this view, IM is a
continuous cycle of five closely related activities:
identification of information needs;
acquisition and creation of information;
organization and storage of information;
information dissemination;
information use.
The idea underlying IM is that just as an organization purposefully and systematically manages its human resources or
financial assets, it should do likewise for its information resources and processes. All the classic functions of
managing an organizational activity apply to IM as well: defining goals, providing leadership, developing policies,
allocating resources, training staff, evaluation and feedback.
What are the benefits of information management? Generally speaking, there are four kinds of benefits from
managing information strategically:
 PARISHKRIT AGRAWAL @ BIT
reduce costs;
reduce uncertainty or risks;
add value to existing products or services;
create new value through new information-based products or services

Knowledge Management is the collection of processes that govern the creation, dissemination, and
utilization of knowledge. Knowledge Management (KM): This is, as the word implies, the ability to manage
"knowledge". We are all familiar with the term Information Management. This term came about when
people realized that information is a resource that can and needs to be managed to be useful in an
organization. From this, the ideas of Information Analysis and Information Planning came about.
Organizations are now starting to look at "knowledge" as a resource as well. This means that we need ways
for managing the knowledge in an organization. We can use techniques and methods that were developed as
part of Knowledge Technology to analyze the knowledge sources in an organization. Using these techniques
we can perform Knowledge Analysis and Knowledge Planning.

Knowledge Analysis (KA): In Knowledge Analysis we model a knowledge source in such a way that we can
analyze its usefulness, its weaknesses and its appropriateness within the organization. Knowledge Analysis
is a necessary step for the ability to manage knowledge. Within Knowledge Analysis we can use knowledge
modeling and knowledge acquisition techniques.

Knowledge Planning (KP): When an organization has a grip on its knowledge (i.e. has performed
Knowledge Analysis), it will be able to plan for the future. An organization will now be able to develop a
multi-year knowledge plan that defines how the organization will develop its knowledge resources, either by
training its human agents, or by developing knowledge-based systems to support the human agents, or by
other means that allow the organization to stay competitive.

Given the importance of knowledge in virtually all areas of daily and commercial life, two knowledge-
related aspects are vital for viability and success at any level:

1. Knowledge assets -- to be applied or exploited -- must be nurtured, preserved, and used to the largest
extent possible by both individuals and organizations.

2. Knowledge-related processes -- to create, build, compile, organize, transform, transfer, pool, apply, and
safeguard knowledge -- must be carefully and explicitly managed in all affected areas.

Knowledge must be managed effectively to ensure that the basic objectives for existence are attained to the
greatest extent possible. Knowledge management in organizations must be considered from three
perspectives with different horizons and purposes:

1. Business Perspective -- focusing on why, where, and to what extent the organization must invest in or
exploit knowledge. Strategies, products and services, alliances, acquisitions, or divestments should be
considered from knowledge-related points of view.

2. Management Perspective -- focusing on determining, organizing, directing, facilitating, and monitoring

knowledge-related practices and activities required to achieve the desired business strategies and objectives.

3. Hands-On Operational Perspective -- focusing on applying the expertise to conduct explicit knowledge-
related work and tasks.
 PARISHKRIT AGRAWAL @ BIT
Total Quality Management (TQM)
Total Quality Management (TQM) is a philosophy that says that uniform commitment to quality in all
areas of an organization promotes an organizational culture that meets consumers' perceptions of quality.

The concept of TQM rests largely on five principles:

1. Produce quality work the first time.

2. Focus on the customer.
3. Have a strategic approach to improvement.
4. Improve continuously.
5. Encourage mutual respect and teamwork.

To be effective in improving quality, TQM must be supported at all levels of a firm, from the highest
executive to the lowest-level hourly employee. TQM extends the definition of quality to all functional areas
of the organization, including production, marketing, finance, and information systems. The process begins
by listening to customers' wants and needs and then delivering goods and services that fulfill these desires.
TQM even expands the definition of customer to include any person inside or outside the company to whom
an employee passes his or her work. In a restaurant, for example, the cooks' customers are the waiters and
waitresses. This notion encourages each member of the organization to stay focused on quality and remain
fully aware of his or her contribution to it and responsibility for it.

The TQM philosophy focuses on teamwork, increasing customer satisfaction, and lowering costs.
Organizations implement TQM by encouraging managers and employees to collaborate across functions and
departments, as well as with customers and suppliers, to identify areas for improvement, no matter how
small. Teams of workers are trained and empowered to make decisions that help their organization achieve
high standards of quality. Organizations shift responsibility for quality control from specialized departments
to all employees. Thus, total quality management means a shift from a bureaucratic to a decentralized
approach to control.

An effective TQM program has numerous benefits. Financial benefits include lower costs, higher returns on
sales and investment, and the ability to charge higher rather than competitive prices. Other benefits include
improved access to global markets, higher customer retention levels, less time required to develop new
innovations, and a reputation as a quality firm. Only a small number of companies use TQM because
implementing an effective program involves much time, effort, money, and patience. However, firms with
the necessary resources may gain major competitive advantages in their industries by implementing TQM

Strategic management

Strategic management is the set of managerial decision and action that determines the long-run performance of a
corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long
range planning), strategy implementation, and evaluation and control. The study of strategic management therefore
emphasizes the monitoring and evaluating of external opportunities and threats in lights of a corporation’s strengths
and weaknesses.

Strategic management has now evolved to the point that it is primary value is to help the organization operate
successfully in dynamic, complex environment. To be competitive in dynamic environment, corporations have to
become less bureaucratic and more flexible. In stable environments such as those that have existed in the past, a
competitive strategy simply involved defining a competitive position and then defending it. Because it takes less and
less time for one product or technology to replace another, companies are finding that there are no such thing as
competitive advantage.