Last week we saw that controls are designed to set limits and to keep important functions consistent, while running a business. They are important to give people guidance when the boss is not around and taking the time to develop and update good controls is an essential part of good management.
We defined control as the set of mechanisms used to keep activities and production going within predetermined limits. Control deals with setting standards, measuring results versus standards and making corrections. It is important to realise here that while controls are needed in all organizations, just a few controls may go a long way. Managers need to be aware of the danger of too much control, which discourages initiative as is often the case in the Ethiopian context.
We classified two kinds of controls: output controls and process controls.
Output controls focus on desired targets and allow managers to use their own methods for reaching defined targets. Setting targets or standards, measuring results against these targets and taking corrective action are all steps involved in developing output controls. Output controls separate what is to be achieved from how it is to be achieved. Process controls are therefore put in place to specify the manner in which tasks will be accomplished and may be classified into three main categories:
Policies, rules and procedures
Formalization and standardisation
Most organizations have a variety of policies, rules and procedures. Policies are the guidelines that outline important objectives and broadly indicate how things are done in the organization. Policies allow for individual discretion while rules and procedures are more specific and rigid. They describe in detail how tasks are to be performed and are designed to apply to all the workers carrying out the same tasks. Rules, procedures and policies are employed as substitutes for direct managerial supervision. Under the guidance of written rules and procedures, the organization can specifically direct the activities of many individuals. They also allow managers to spend their time on important, unusual or unique conditions and situations. In other words, rules, procedures and policies may seem impersonal and inflexible but they free managers for other choices.
Formalization refers to the written documentation of rules, procedures and policies to guide behaviour and decision making. Formalization is often used to simplify jobs. Written instructions allow individuals with less training or experience to perform comparatively sophisticated tasks. They also ensure that tasks are performed in the right order.
Standardization sets the framework within which tasks are performed and include guidelines so that similar tasks are repeatedly performed in a similar fashion. Standards may come from years of experience in dealing with typical situations or they may come from training.
Another way to institute process controls is to establish a quality management process within the organization or business, by which managers continuously work on improving supervision, training employees, retraining them in new skills and creating a structure that will consistently push for high quality and innovation. Training, learning and consistency of purpose are essential ingredients of quality management.
Along with planning, the development of controls is perhaps the most difficult part of management to get employees motivated. After all, rules and procedures seem a long way from producing, marketing and selling. But having controls is responsible management and taking the time to develop and keep up to date good controls is a key part of good management. As mentioned earlier, it will allow managers to manage rather than administer day to day.
To check whether you have sufficient and effective controls in your company I’d suggest you try and answer the following questions:
Do you have the following policies and have they been updated within the past 24 months?
Quality assurance policy
Do you train staff and management annually on key policies?
Do you enforce your policies consistently?
If not, it is time to deal with it and to begin developing the most important controls: finance and personnel. Make sure though to include employees in the process and allow for input and ownership. You will get good practical input and less resistance when a policy is implemented.
Finally, all of us need limits. Set them with your controls and then enforce them. If you are not willing to enforce a certain part of a policy, don’t put it in writing. Make sure your policies, rules and procedures are up to date and enforceable. Managing this will indeed set you free.
Sources: Managing Organizational Behavior by Schermerhorn/Hunt/Osborn Mission Based Management by Peter C. Brinckerhoff