Effective system of control
|Effective system of control|
Effective system of control is necessary to perform all functions of modern manager. It is source of managerial information, and is necessary for planning, motivating and organizing. Qualities of an effective system of control, are:
- Accuracy - Inaccurate data can lead to wrong decisions
- Timeliness - Delays in information flow, lead to low effectiveness of corrective actions
- Objectivity and rationality - for employees and managers using control information. Incomprehensible control system generates confusion and frustration of workers
- Focus on strategic points - Managers should not focus monitoring of activities with minor importance or low importance for the efficiency of the organization. In particular, he should control areas, where the deviation from the norm can cause a lot of damage to the company.
- Economic Realism - The cost of implementing the control system should be less than the benefits that are achieved thanks to it.
- Organizational realism - Employees need to see the relationship between labour productivity and received rewards. Standards must be realistic.
- Coordination - Information about results should be coordinated with the course of the work process. It must be delivered to all involved employees. It is essential for complex processes and teamwork
- Flexibility - change of control instruments should follow the development of the company, changes in the environment or internal situation.
- Normativity and operability - The control system should include a set of proposals for corrective actions for the most common deviations. This information should be usable in practice.
- Approval by members of the organization - Control system must be consistent with the objectives of the organization, and the aspirations of manage employees. Its design has to be adapted to different levels of management.
Examples of Effective system of control
- Performance Appraisals: A performance appraisal system is used to measure an employee's performance and provide feedback. This system allows managers to identify areas of improvement and reward achievement. Performance appraisals are often used in conjunction with other forms of control such as goal setting, feedback, and rewards.
- Budgeting: Budgeting is an important tool used to monitor, control and allocate resources. A budget allows managers to plan for the future, assess current performance, and compare actual performance with the planned budget. It also allows managers to identify areas of potential savings and allocate resources to areas of need.
- Quality Control: Quality control is used to ensure that products and services meet specific standards. Quality control systems allow managers to measure performance, identify areas of improvement, and take corrective action when necessary. Quality control systems are often used in conjunction with other forms of control such as continuous improvement, benchmarking, and total quality management.
- Internal Auditing: Internal auditing is used to assess the effectiveness of control systems. Internal audit reports provide managers with detailed information about the performance of their control systems and suggest areas of improvement. Internal audits are often used to measure compliance with laws, regulations, and internal policies.
- Statistical Process Control: Statistical process control (SPC) is a method used to monitor and control process performance. SPC uses statistical methods to monitor and control process variables such as input, output, and other key process variables. SPC allows managers to identify areas of improvement, take corrective action, and improve process performance.
Advantages of Effective system of control
An effective system of control is a necessary component of modern management, providing a source of information and aiding in the planning, motivating, and organizing of operations. The following are some of the advantages that an effective system of control can provide:
- It can provide feedback on the performance of employees or other operations, allowing managers to make necessary changes and improvements.
- It can provide a clear assessment of financial results, helping to ensure that operations are cost-efficient.
- It can provide a mechanism for monitoring compliance with laws, regulations and policies.
- It can help to ensure that objectives are met and that resources are used in the most efficient manner.
- It can provide insights into organizational performance, helping managers to identify areas for improvement.
- It can provide a means of tracking progress and measuring results, allowing managers to adjust plans as necessary.
Limitations of Effective system of control
An effective system of control is necessary for the modern manager to perform all of his functions, such as planning, motivating, and organizing. However, there are several limitations that should be taken into account. These include:
- Lack of sufficient data – without accurate and up-to-date data, it is not possible to make informed decisions.
- Inadequate resources – if an organization does not have the necessary resources to maintain the system of control and to measure the performance of the staff, it will be difficult to make effective decisions.
- Complexity – when the system of control is too complicated or difficult to understand, it can be difficult to make effective decisions.
- Poor communication – if the system of control is not properly communicated to the staff, it can be difficult to interpret the data and make the best decisions.
- Subjectivity – when the system of control is based on subjective opinions, it can be difficult to make accurate decisions.
An effective system of control is essential for managerial functions such as planning, motivating and organizing. The following approaches are important for an effective system of control:
- Management by Objectives (MBO): This approach involves setting objectives for employees and then evaluating their performance against these objectives. It puts emphasis on the importance of setting measurable objectives and encouraging employees to meet these goals.
- Balanced Scorecard: This approach involves measuring performance against several indicators, such as financial performance, customer satisfaction, operational efficiency and employee morale. It helps to ensure that performance is being monitored and evaluated from multiple angles.
- Total Quality Management (TQM): This approach promotes continuous improvement and encourages employees to take an active role in identifying and solving quality issues.
- Feedback Mechanisms: This approach involves collecting feedback from employees, customers and other stakeholders and using it to monitor and improve performance.
In summary, an effective system of control requires incorporating Management by Objectives, Balanced Scorecard, Total Quality Management and Feedback Mechanisms in order to ensure that performance is monitored and evaluated from all angles.
- Anthony, R. N., Govindarajan, V., & Dearden, J. (1998). Management control systems (Vol. 9). Boston, MA: Irwin McGraw-Hill.
- Evans, J. R., & Lindsay, W. M. (1999). The management and control of quality.
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- Langfield-Smith, K. (1997). Management control systems and strategy: a critical review. Accounting, organizations and society, 22(2), 207-232.