Management control ensures the human physical and technological resources are allocated and utilised to achieve the overall purpose of the organisation. The feedback control is about monitoring the outputs desired against outputs achieved. There are many ways of management control which include feedback, feedforward, bench-marking and auditing. Most of these are usually employed by progressive organisation.
Control
Control is a process whereby management ensures that
the organisation is achieving the desired objectives. It is a set of organised
(adaptive) actions directed towards achieving specific goals in the face of
constraints (Wilson and Gilligan, 1997). The existence of a control process
enables management to know from time to time where the organisation stands in
relation to the organisation's goals. This implies that progress should be
observed, measured and redirected if there are discrepancies between the actual
and the desired positions. Control and planning are complementary and each
should logically pre-suppose the existence of the other. Maciariello (1984)
gives the following definition of management control (MC) and management
control system (MCS).
Management
control is the process of ensuring that the human, physical and technological
resources are allocated so as to achieve the overall purposes of an
organisation. An MCS attempts to bring
unity of
purpose to the diverse efforts of a multitude of
organisation's and the managers towards its objectives and goals. An MCS
consist of a structure and a process.
However, the interpersonal nature of control within an organisations needs to be recognised in order to relate to motivation, goal congruence and the reward system as indicated by Hosted (1968) who states that “control within an organisation system is the process by which one element (person, group, norm, machine or institution) intentionally affects the action of other elements”.
Strategy is seen as being related to control. However, it can be treated separately. This is because it is possible for an enterprise with good strategies to fail, when the control system is poor and vice versa. In general, the better the formulation of a strategy, the greater will be the number of feasible control alternatives and the easier their implementation is likely to be, according to Wilson and Gilligan.
Anthony (1988) refers both to the hanks between control and strategic implementation on one hand and the interaction among the individuals on the other. He says that “control is used in the sense of assuring implementation of strategies. The management control functions include making the plans that are necessary to assure that strategies are implemented.
Management control is the process by which managers influence other members of the organisation to implement the organisation's strategies. There are different ways by which an organisation carries out its management control. They do this by, feed forward, auditing, budgeting, feedback and bench-marking systems. These methods shall be considered in brief.
Feed Forward Control
This is defined as “a measurement and prediction
system which assesses the system and predicts the out put of the system at some
future date” Bhaskar and Housden (1985). This differs from a feedback system in
that it seeks to anticipate and thereby to avoid deviations between actual and
desired outcomes.
According to Costing (1982), the components of feed
forward control system are:
a.
An
operating process which converts an input to output.
b.
A
characteristic of the process which is the subject of the control.
c.
A
measurement system which assesses the state of the process
and its input and attempts to predict
its output.
d.
A
set of standards and or criteria by which the predicted state of the process
can be evaluated.
e. A regulator, which compares the predictions of process outputs to the standards and which takes corrective action where there is likely to be a deviation.
For the effectiveness of feed forward system, it must
be based on a reasonable predictable relationship between inputs and outputs,
i.e. there must be an adequate degree of understanding of the way in which the
organisation functions.
Audit
This is an approach towards assessing marketing effectiveness
Kotler
(1984) offer the view that auditing
is the ultimate control measure. It evaluates performance in terms of input
used, output generated and the
assumptions underlying the marketing strategies used.
The ranges of possible audits include:
(ii)
audit
from across, i.e., by colleagues in another function
(iii)
audit
from above, by the manager or superior company audit office
(iv)
company
task-force audit, i.e. a team set up specifically to conduct the audit,
It is
usually better to have a combination of these methods.
Budgeting
A budget is a quantitative plan of action that aides in the co-ordination and control of acquisition, allocation and utilisation of resources over a given period of time. Budgeting is also known as profit planning. It is the widest ranging control technique. It covers the entire organisation rather than to a section of it. Typically, budget is compiled on an annual basis. The time span can however, be broken into half-a-year, quarterly, monthly and even weekly. Regardless of whether the budget is a long-term or short-term one, continuous or periodic budget, the fundamental requirements that should be met include the following:
ii. top
management support and sponsorship
iii. a
knowledge of cost behaviour
vii. effective organisational structure
viii. sufficient level of education in budgetary practice.
Feedback Control
Feedback control should ensure self-regulation in the face of changing circumstances once the control system has been designed and installed. The importance of feedback control is found in homeostasis which defines the process whereby key variables are maintained in a state of equilibrium even when there are environmental disturbances.
For example, if a company plans to sell 100,000 strategic management books, in the next 12 months and by the end of the third month, the pattern of demand falls to 80,000 books due to the launch by another company of a good strategic management book which is a competing book. After another three months, the competitor puts up the price of his own book while the original company holds its own price constant. By this technique the demand may increase to 150,000 units.
The feedback signals should ensure that the company is aware through monthly reports, may be of the archival sales versus planned sales. So, the launch of the strategic management book by a competitor would be identified as the reason why sales levels were below expectations in the early period of the first three months.
| A Feedback Control System |
In response
to the derivations between actual and desired results (feedback) an explanation
must be found and actions taken to make corrections. Such corrective measures may include amending
production plans to print
fewer (or more) books, allowing inventory level to fall (or rise) to meet the
new demand pattern and modification of the promotional plans to counter
competitive activities. These could all come from a feedback control system.
However, if the derivations (variances) from the feedback are minor it may be possible for the process to absorb them without any modification. An inventory control system could just be designed to accommodate such minor variations between the expected and the actual levels of demand with buffer stocks being prepared for the purpose.
In the case of extreme
situations in which the stock has to change from 100,000 to 80,000 and 150,000
units, the inputs have to be amended deliberately as soon as the cause of the
variations has been identified. There is usually a cost associated with
variance, which tend to be proportional to the length of time it takes to
identify and correct the variations. Cushing (1982) suggests some principles
for the proper functioning of a feedback control system which include:
i. The benefits from the system should be at least as great as the costs of developing, installing and operating it. It is often difficult to specify precisely the benefits (except in situations such as better customer service, increased efficiency) or the costs of relating to different system designs, but estimations of these could be made.
ii.
Variance,
once measured should be reported quickly to facilitate prompt control action.
iii.
Feedback
reports should be simple, easy to understand and highlight the significant
factors requiring managerial attention.
iv. Feedback control systems should be integrated with the organisational structure of which they are part.
The boundaries of each
process are subject to control and should be within a given manager's span of
control.
Bench-Marking Control
The bench-marking control
system is an analytical process through which an enterprise's performance can
be compared with that of its
competitors. It is used by organisations such as Xerox and Ford in
order
to be able to evaluate the following:
i.
Identify
the key performance measures for each business function.
ii.
Measure
one"s own performance and that of the competitors.
iii.
Identify
areas of competitive advantage or
disadvantage by
comparing performance levels.
iv.
Design
and implement plans to improve one"s own performance on key issues
relative to competitors.
Bench-marking is applicable in other functional areas
with the potential to help change the corporate culture, if properly
communicated throughout the organisation. In the case of bench-marking products
or services offered by customers but not by itself, an enterprise"s senior
manager can gain insights to guide its decisions by keeping abreast of new
developments. In this way, it will be easier to assess how to respond.
When considering how to take corrective action, it is
important to make an assessment of the probable response of competitors to any
action that might be taken. This is a vital aspect of strategic behaviour. It
is expected that the identities of the competitors are known (both actual and
potential), and profiled. The possible responses from them can then be
explored, taking into account conjectures regarding the beliefs that the
competitors have of one"s own enterprise including its resources,
capabilities and strategies.
Process of Making Corrective Adjustment
There is no one strategic plan or
strategic scheme for implementation that can foresee all the events and
problems that may arise in future.
Adjustment making or “mid-course” corrections are
normal and a necessary part of strategic management.
When there is a need to react or respond to a new
condition involving the strategy or strategy implementation, the process of
what to do has to be evaluated. This evaluation must consider whether the
action should be immediate or whether the time permits a more deliberate
response. In cases where time permits a full-fledged evaluation, strategy
managers prefer a process of solidifying commitment to a response. This
approach includes these:
1.
To
stay flexible and keep a number of options open.
4.
To
gain in-depth information from specialists.
5.
To
encourage subordinates to participate in developing alternatives and proposing
solutions.
6.
To
get the reactions of many people to proposed solutions as a test of their
potential and political acceptability.
7.
To
seek to build commitment to a response by gradually moving towards a consensus
solutions.
The overriding principle seems to be to make a final
decision as late as possible so as to make as much information to bear as is
needed; or let the situation clarify enough to know what to do or allow the
various political constituencies and power basis within the organisation to
move towards a consensus solution
Corrective adjustment to strategy need not be just reactive. A proactive adjustment constitutes a second approach to improving strategy or its implementation. The distinctive feature of a proactive posture is that adjusting actions arise out of management's own drives and initiatives for better performance as opposed to forced reactions.
Successful strategy managers have been known and observed to employ a variety of proactive tactics.
The key feature of strategic management is that the job of formulating and implementing a strategy is not one of steering a clear-cut, linear course of carrying out the original strategy intact according to some perceived and highly detailed implementation plan. Rather, it is one of operatively (1) adapting and reshaping strategy to unfolding events (2) employing analytical-behavioural-political techniques to bring internal activities and attitudes into alignment with strategy.
The process is interactive, looping and re-cycling to fine-tune and adjust in a congruously evolving process where the conceptually separate acts of strategy formulation and strategy implementation blur and joint together. Corrective active action comes after plan implementation, performance monitoring and analysis of significant valances. For example, how should an enterprise respond to changes in the environment? Usually, there are many ways. However, Barrett (1986) points out two opposing possibilities. The two approaches are as follows:
Deterministic Approach
In this approach, it is felt that the enterprise's
environment determines its actions, its strategies and structure. The idea of
adaptation to environmental change is hereby taken to an extreme. It is a known
fact that changes in the environment, either in the form of opportunities or threats,
will result in a competitive strategy. The implementation of these changes may
bring about changes in the organisation's structure.
Strategic Approach
Strategy implementation and Control
The successful implementation of a strategy is not
easy. And if implementation is left to compete with internal pressures of
coping with crises, reacting to competitor's action, company policies and
personal career needs, it is most likely to be disrupted.
Plan implementation poses a fundamental dilemma. This
is because, to be effective, forces leading to organisational integration must
be reconciled with forces leading to organisational segmentation. There are two opposing forces. To achieve a balance therefore,
the following have to be considered.
a. The
messages of the plan should be communicated so that there will be a proper
understanding of the plan.
b.
There
should be a clear recognition of what the plan says, so that the all those who
have a role to play in the plan implementation are aware of their roles.
c.
There
should be a consensus about the wisdom of pursuing the plan in order to secure
commitment to its accomplishment.
Strategy Implementation and Information Control
The effectiveness of a
manager on his job will depend on how much, how relevant and how good his
information is, and how well he interprets and acts on such information.
Usually, the complaint is that the information is too late, is of the wrong
type, unverified or even suppressed. So, for information to be of value, it
must be clear, detailed, timely, accurate and complete and must not contain
vague figures thrown out by an unplanned system. The information must be
explicit.
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