Success in business occurs rarely by luck; it is a fruit of careful and practiced planning, strategic execution, and continuous monitoring.
In this regard, within the array of business management, lies two elements of excellence that are interlinked yet different: planning and controlling.
While the former relates to designing strategies to achieve the goals of an enterprise, the latter, controlling, applies these strategies to reality through proper monitoring.
What, then, is controlling in business management and what role does it play in ensuring the right way for an organization?
This blog post would break down the concept of controlling in business management into simple terminology that defines clearly and broadly how controlling works, the importance, types, and challenges.
What is Controlling in Business Management ?
Controlling, at its core, is merely ensuring that whatever a company does is in support of the activities toward the realization of its objectives.
In simpler words, it's about checking if a business is moving in the right direction and corrective action in case it is not.
Consider being in a car heading towards a destination. You constantly check the route, speed, and fuel to make sure that you are on the right course. If something goes wrong - say, you took the wrong turn or fuel is low - you will be prompted to adjust so that you don't get stuck or lost anywhere.
Controlling is not very different in business management; it simply refers to having constant control over what progress has been made and adjusting in such a way that keeps a company on course.
Importance of Controlling in Business Management :
Why is control important in business management? Here are a few key reasons:
1. Achieving Goals:
Without control, it becomes easy for an organization to lose focus on its objectives. Controlling ensures everything done by the organization contributes toward achieving the set goals.
2. Efficient Use of Resources:
Businesses have limited resources—money, time, labor, etc. Controlling helps managers ensure such resources are used effectively without wastage or inefficiency.
3. Adapting to Change:
Companies adapt to change in a business environment, either due to economic shifts or emerging new competitors or breakthroughs in technology.
A well-designed control system allows companies to quickly respond to changes and keep them productive.
4. Ensuring Accuracy:
Controlling aids in ensuring that the activities of the organization are indeed performed according to the planned standards.
Errors are detected early, and correction made before they could create big problems.
The Process of Controlling :
Controlling is not an activity that happens in one step; it is, however rather a process that encompasses a few of consecutive steps.
Let's see each in detail.
1. Setting Performance Standards:
The first step in control involves setting well-defined, measurable performance standards. These form the yardsticks or goals that the firm hopes to achieve.
For example, a firm may set a sales objective at $1 million for the quarter or lower the production costs by 10%.
2. Actual Performance Measurement:
After setting the standards, measuring actual performance becomes relevant.
For instance, it may involve tracking the sales figures, monitoring the production output, or scrutinizing the customers' satisfaction.
Therefore, in this respect, the proper and prompt collection of accurate data is necessary so that authentic results may be obtained.
3. Compare Actual Performance with Standards:
After measuring the actual performance, the manager compares it against the earlier set standards.
Has it achieved what is being planned or fallen below it? This comparison helps one know where the organization is and where it should be.
4. Taking Corrective Action:
Where a variance is discovered between what really happens and what the standard required, managers should initiate corrective action.
It could either be an adjustment in strategies, allocation of additional resources, or correction of specific issues within an organization. The desire would be to put the company back on track sooner and as quickly as possible.
5. Feedback and Review:
After corrective action has been taken, the results should be reviewed to establish whether changes have occurred or not. This essentially provides a feedback loop for improving controlling efforts in the future.
Types of Control in Business Management
There are various control mechanisms available for use by businesses; these vary with when and how they are applied in the management process.
The main types of control are:
1. Feedforward Control in Management :
This type of control occurs before the actual activities. Its objective is to provide protection against potential problems through prevention by foreseen issues with proactive action taken.
For example, preventive control concerning quality control measures set before commencement of production.
2. Concurrent Control in Management (Real-Time Control):
As the name may suggest, concurrent control occurs at the real-time when activities are actually performed. It can be compared to having a supervisor monitor employees at work to ensure that they operate according to the correct procedures set in line with performance standards.
Controls of this nature provide for immediate corrections should any default occur.
3. Feedback Control in Management (Feedback Control or Post-Action Control):
This control takes place after the activities have been carried out. In this, the outcome of activities is assessed and then modified if necessary, for subsequent applications.
For example, a firm may review the company's performance at the quarter-end in terms of finance to decide on improvement criteria for the next quarter.
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Tools and Techniques for Effective Controlling
To effectively carry out controlling, firms use several tools and techniques. Some of the widely used ones are as follows:
1. Budgeting:
The most used control tool where budgeting sets financial goals as well as limits for the various departments of an organization. Budgeting makes a company realign their spending with set financial objectives.
2. Key Performance Indicators ( KPIs ):
The KPIs are the numbers that measure the level of performance about what happens in the various business areas, like growing sales, retaining customers, or increasing efficiency in production.
It gives the manager a measurable amount that can be used to determine if the business is meeting its targets or not.
3. Audits :
These are systematic evaluations, either financial or operational, that ensure compliance with all regulations, standards, and policies and, most importantly, find areas that need a little improvement.
4. Performance Appraisals:
Employee performance appraisals are a control instrument that allows for the checking of the level at which the employees are achieving their individual performance standards.
This is helpful in aligning the goals of the employee with the overall organizational goals and thus can identify areas whereby more training or resources are needed.
Challenges in Controlling :
Controlling is a fundamental necessity for the successful operation of business, yet not free from some problems.
Some of the common challenges the manager has in controlling include:
1. Resistance to Change:
People by nature resist change. There can be a possibility that in the case of corrective actions, the employees or even managers would resist the new processes or adjustments and therefore controls are difficult to accomplish effectively.
2. Right Data Not Available:
Controls are largely dependent on the provision of right and up-to-date data. If such information gathered is inappropriate or delayed, then wrong decisions will take place and the controls will be ineffective.
3. Over-Control:
There is also the potential for over-controlling business functions in which too much control and checking systems are imposed.
Over-control very often does not allow much creativity to emerge, lowers morale, and reduces total effectiveness.
4. External Influences:
Not everything impacting the performance of a company is within its control.
Economic conditions, the imposition of new government regulations, or intensified market competition can sometimes make it nearly impossible for performance standards to be met even with adequate internal controls.
Conclusion
Controlling is the critical process in the business management that keeps a company well-aligned with its goals, utilizing available resources effectively as it responds to changing circumstances.
It is through the structured approach of measuring performances comparing them, and taking corrective action whereby controlling allows businesses to keep their eyes glued to their established goals in becoming successful.
Proper systems of control assisted by the right tools and strategies help overcome associated obstacles and steer the organization toward steady growth and profit.
Controlling therefore, can be said to be the glue which hangs together the management process, making sure that all the plans made in the planning phase of management are executed and that the organisation continues to be productive.
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