Reading: Lesson 3 - The Controlling Function

3.3.A - The Controlling Function

1. UNDERSTANDING CONTROLLING

1. All managers perform five administration functions. Planning includes defining objectives and directives for the business. Organizing manages procurement and securing assets so the objectives can be met. Staffing includes finding the right individuals to complete job tasks efficiently and effectively. Leading  is directing and supporting the group so they can work viably. Controlling is determining if objectives are being met and what moves to make if execution misses the mark concerning the objectives.
   
2. Despite each of the functions having a specific purpose and incorporating a particular arrangement of exercises, they are altogether related. Planning enhances if there is a viable system to provide data to managers. Without viable planning, it is hard to determine how to organize business resources and allocate them effectively. Staffing and leading are inconceivable without plans and troublesome with an ineffectively planned organization. Controlling can't be finished unless the organization has particular objectives and plans. The Figure below demonstrates that management is a consistent operation and that each capacity bolsters their counterparts. Controlling is the concluding function and provides the data expected to enhance the management procedure and business operations. 
   

   
   

3. Controlling includes three essential steps: (1) following norms that were set up to help meet each of the organization's objectives, (2) measuring and contrasting execution against the set up principles to see if performance met the goals, and (3) making effective changes when execution misses the mark concerning the standards.
   

4. Consider the accompanying illustration. A business has an objective to produce and deliver to a client 1,000 made-to-order covers by a particular date. The standard is to deliver 25 covers every day for 40 sequential days. Amid the initial 10 days, just 200 covers are created, or an average of 20 covers every day. Since production is 50 covers beneath the standard—250 covers in 10 days—the managers must make a move to increase production over the next 30 days. The corrective action may incorporate overtime hours allocated, or adding additional staff. Indeed, even as they make a move, the managers should carefully examine the production process to understand why the initial standard could not be met. 
   

5. In another case, the manager of a shoe store needs to ensure that new styles of shoes sell quickly. The standard is to offer 30 percent of all exclusive style shoes inside one month. On the off chance that the store sells just 20 percent, the supervisor must make effective changes. The supervisor may expand the promoting for the shoes, give salespeople a higher commission, or discount the cost to sell more quicker. The manager will also need to utilize this data when arranging restock purchases later on.
   

6. In every case, the managers set a standard based on the tasks to be completed. At that point they contrasted execution against the standard to check whether the organization's objectives could be met. At last, if execution was not meeting the standard, the managers must decide how to amend the issue. Note that in the both cases the managers did not wait long to start measuring execution. Controlling exercises ought to be finished before the issue is too major or excessively costly, making it impossible to amend.
   

2. SETTING STANDARDS

1. Managers must institute standards during the planning stage. They will have to set high yet achievable standards. Managers can decide sensible principles by concentrating on the task, utilizing their past experience, gathering industry data, and requesting contribution from experienced specialists. The standards turn into the methods for judging achievement and for applying controls.
   
2. The standards used to control business operations rely upon the type of business, its size, and the exercises being controlled. The most important guidelines are amount, quality, time, and cost gauges.
   
3. A quantity standard sets up the normal measure of work to be finished. Quality standards take different structures, contingent upon the work. Production supervisors may determine the base number of units to be produced every hour, day, or month by individual laborers or group of laborers. Sales managers could establish the amount of potential customers that sales representatives must connect with every day or week by week. A supervisor of administrative services may build up a base number of forms to be finished or number of lines of data to be entered in a hour by data preparing staff. The amounts Jasmine established for her representatives in the telemarketing office are cases of quality standards.
   
4. Quantity standards alone are frequently insufficient to judge an employee, a product, or a service. A quick laborer, for instance, can be exceptionally reckless, or a or a slow worker can be overly cautious. Therefore, the quality of the work executed is often just as valuable as the quantity produced. A quality standard portrays expected consistency in production or performance.
   
5. Perfection—having no mistakes—may be the only acceptable standard for some products and services. A machine that does not work can't be sold. An invoice with pricing errors can't be sent to a client. A bookkeeper cannot miscalculate a customer's taxes. Flawlessness is the standard, is the standard, but it may not always be practical or cost-effective to develop procedures to check every finished product. On an assembly line where thousands of products are produced every hour, sampling a few products each hour may be enough to identify when quality problems occur so corrective action can be taken.
   
6. Time standards are firmly identified with quantity and quality standards. Most business activities can be measured by time. A time standard is the fixed amount of time expected to finish a task. The amount of time it takes to finish a task affects costs, the amount of work finished, and often on the quality of the work. Time standards are more essential to some organizations than they are to others. Building contractors and bakeries are examples of businesses that normally have strict time schedules. If they do not meet the schedules, they suffer an immediate financial loss. If an office tower is not completed on time, the builder usually must pay a financial penalty. A baker who does not have doughnuts and bagels ready for the breakfast rush will lose a major portion of the day’s sales. Other businesses may not see the immediate financial loss, but failure to maintain time standards will result in fewer products being produced, poor coordination of activities between departments, or other problems.
   
7. An important measure of the success or failure of a firm is financial profit or loss. Profit equals income minus costs. Therefore, managers can increase profits by either (1) increasing sales revenue or (2) decreasing costs. Not all managers or employees are directly connected with work that increases sales. However, most employees and managers do influence costs. Wasting material or taking more time than necessary to perform a task adds to the cost of doing business. Increased costs, without a proportionate increase in sales dollars, decrease profit. Businesses must be cost-conscious at all times. A cost standard, or the predetermined cost of performing an operation or producing a good or service, is an effective way of helping businesses maintain profitability.
   
8. Generally, businesses pay more attention to cost controls than to any other type of control. The control devices used, as a result, are numerous. One of the main purposes of the accounting department is to provide detailed cost information. This is why the head of an accounting department is often called a controller. Most managers, however, act as cost controllers in some way. Increasingly, employee work teams and individual employees are assigned responsibility for cost controls.
   
9. The most widely used tool for controlling costs is the budget. Like schedules and standards, budgets are also planning devices. When a budget is prepared, it is a planning device; after that, it is a controlling device. Actual cost information is collected and compared with budgeted amounts. These comparisons permit judgments about the success of planning efforts and provide clues for making changes that will help the company reach its financial goals. Managers need to monitor costs regularly. When budget problems are identified early, managers have time to take corrective action.
   
10. Once standards have been established, they are used to determine effective performance. Managers gather information on all parts of business operations for which they are responsible. They compare that information against the standards to determine if performance is meeting the standards. A variance is a difference between current performance and the standard. A variance can be positive (performance exceeds the standard) or negative (performance falls short of the standard). Whenever a variance exists, managers must identify the reasons for the difference.
    
11. Actual performance exceeding the standard may seem to be an ideal situation that requires no corrective action. However, it is important to understand why the higher- than-expected performance occurred so that it can be repeated. Or, perhaps the positive performance in one area of the business is having a negative effect on another area. In addition, managers should review the process for developing standards to see why they set the standard lower than the performance that could actually be achieved.
    
12. The greatest concern occurs when performance is lower than the standard. That means that the company is not performing at the expected level. It also says that there are problems between planning and implementing activities. Managers not only need to take corrective action as soon as possible to improve performance but also must review procedures carefully to avoid the same problem in the future. Managers must be careful how they communicate the problem to employees and how they take corrective action. If employees believe the manager is blaming them for their role in the substandard performance, they may not be motivated to help solve the problem. On the other hand, if employees do not recognize the seriousness of the problem, they will not make the changes needed for improvement to occur.
    
13. Monitoring all activities for which managers are responsible can take a great deal of time. Managers can use information systems to reduce the amount of time spent on controlling. Computers can monitor performance and compare it to the standard. When the computer identifies a variance, it generates a variance report for the manager. Through the use of computer monitoring and variance reports, managers can identify problems quickly and begin to take immediate corrective action.