Management’s Controlling Function

A role that is of paramount importance for managers in any organization is holding themselves and those they supervise accountable for satisfactorily achieving the goals and objectives that have been designated for accomplishment within a specific time allotted for purposes. This principle applies to day-to-day operations as well as strategic planning aims. The common measurements of the firm’s activities that should be periodically checked against benchmarks, past performance, and expected results, include quality of goods and services provided, sales levels and performances, inventory management, financial soundness, expenses incurred, and the variability of outcomes over time. With this data in hand, management may understand the state of the company, make adjustments to improve effectiveness, and reduce inefficiencies. Subsequently, rewards and sanctions may be doled out as appropriate to the situation. This controlling function often includes formal performance evaluations that set objective criteria with which both managers and employees may be judged, and is also vital for the evaluation phase of strategic planning.

There are four basic steps that comprise control in organizations. First, performance standards must be established. With both quantitative and qualitative marks set, the criteria for positive or negative reviews are in place. Second, individual contributors, managers, groups, divisions, and overall organizational performances are rated so as to accurately and precisely assess outcomes. Third, actual vs. expected results are compared and contrasted to determine desirability of outcomes. Fourth, changes are made to company goals, processes, activities, and tasks in order to achieve more desirable results in the future. Consequently, personnel may be advised regarding corrections to be made, given different responsibilities and/or tasks, commended and/or compensated for superior performance, admonished and/or punished for inferior work, reassigned to another position, or removed from their job altogether.

In regards to control as it pertains to strategic planning, the evaluation phase of the strategic-management model allows the firm to use a framework to systematically review the underlying bases, then measure performance, and take corrective actions. The EFE and IFE Matrix allows for an analysis of internal and external factors. Results are compiled by comparing financial ratios for quantitative criteria. Qualitative criteria is also presented for evaluation including human behavior, marketing, R&D, and MIS. Finally, changes such are revising the organizational structure, divesting or acquiring business units, adding or replacing employees, as well as internal fixes such as policy changes, reallocation of resources, accounting/finance remedies, and reshuffling of personnel are made in order to obtain more profitable strategy formulation and implementation outcomes.

The control function of management also extends beyond corporate governance to social responsibility. While a firm has economic and legal responsibilities to stakeholders, it must also monitor and take actions to fulfill its ethical and discretionary responsibilities. It is therefore necessary for senior managers to take into account the effects of strategic decisions on the people it employs, serves, and impacts, in order to gain a clear understanding of both the short-term and long-term ramifications of activities within a moral context. A company with the best organization and material resources may stumble and fall if senior management’s acknowledgement of what is good and unethical is too far from the definition that society establishes.

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