Operational controlling

From CEOpedia | Management online

Operational business controlling is used to regulate the internal processes necessary to monitor and direct of the company in the short term. It allows making business decisions related to ongoing business operations. The main tasks of operational controlling include:

  • controlling of the results,
  • liquidity planning,
  • monitoring of profitability,
  • improving effectiveness of use of existing resources.

The process of operational controlling (also called business controlling) allows to convert strategic plans in the operational plans. These plans must be tailored to specific units that make up the whole company. The whole process takes often place in the so-called budgeting process.

Elements of operational controlling system

Basic elements of business controlling system are:

Business controlling normally takes the form of budgetary control, and is performed by comparing the short-term performance of organizational units with those established in the budget. Then managers analyse the deviations of actual values ​​from the values set in goals for specific unit and the whole company.

Example of Operational controlling

Operational controlling can be used to improve efficiency and productivity within an organization. For example, a manufacturing company may use operational controlling to monitor production levels and compare them to the desired goals. If production levels are lower than desired, the company can then take action to identify the cause of the underperformance and address it. This could involve changing the production process, providing additional training to employees, or investing in new equipment.

Ultimately, operational controlling helps organizations to ensure that their operations are working as efficiently and effectively as possible, and can help to identify areas for improvement.

Steps of operational controlling

Operational controlling involves a number of steps, including:

  • Establishing goals and objectives: This requires setting measurable targets for various operations, such as production levels or cost savings.
  • Monitoring performance: This involves collecting data on the performance of the operations, such as the number of products produced or the cost of materials used.
  • Evaluating performance: This involves comparing the actual performance of the operations against the specified objectives. If performance falls short of the objectives, corrective measures can be taken.
  • Taking corrective action: This involves identifying the cause of any underperformance and taking steps to address it, such as changing processes or improving training.

When to use Operational controlling

It is important to use operational controlling when an organization wants to ensure that its operations are running as efficiently and effectively as possible. This can help to reduce costs and maximize profits, as well as improve customer satisfaction and strengthen the organization's competitive position. Operational controlling can be used on a regular basis to continually monitor performance and identify any areas of underperformance. It can also be used as part of a larger performance management system, such as a Balanced Scorecard, to ensure that the organization is meeting its overall objectives.

Types of Operational controlling

Operational controlling encompasses a number of different types of control, including:

  • Financial control: This involves monitoring and evaluating an organization’s financial performance, such as revenues, costs and profits.
  • Operational control: This involves monitoring and evaluating the operations within an organization, such as production processes or customer service.
  • Quality control: This involves monitoring and evaluating the quality of products or services produced by the organization, such as the number of defects or customer complaints.
  • Human resource control: This involves monitoring and evaluating the performance of the organization’s employees, such as absenteeism or job satisfaction.

Role of operational planning and business controlling

Fig. 1. Relationships between operational planning and controlling

It allows to identify intermediate objectives in relation to the objectives set in strategic planning. Operational planning includes:

  • single event or action,
  • small number of variables,
  • execution of relatively simple tasks,
  • balancing resources,
  • aggregation of information,
  • short time horizon.

Design of operational controlling system

The detailed design process consists of the following steps:

  1. Determination of the time, scope and field of controlling.
  2. Preparation - setting goals and plans.
  3. Selection of parameters, measures and indicators.
  4. Providing proper information sources across organization.
  5. Determining the procedure for monitoring deviations.
  6. Establishing rules for decision-making process.
  7. A decision on the implementation of the system.
  8. Determination of the detailed time schedule and financial resources needed for implementation

Operational controlling provides broad source of the information necessary to control main economic processes. This information pertains primarily of present business, performance and resource utilization.Operational controlling is closely linked and integrated with strategic controlling.

Advantages of Operational controlling

There are a number of advantages associated with operational controlling. These include:

  • Improved efficiency: By monitoring and evaluating operations, it is possible to identify areas for improvement and take steps to reduce waste and increase efficiency.
  • Increased cost savings: By measuring performance and taking corrective action, it is possible to reduce costs and increase profitability.
  • Improved quality: By monitoring and evaluating operations, it is possible to identify areas that need improvement in terms of quality and take steps to ensure that products and services are of the highest standard.

Limitations of Operational controlling

Operational controlling is an important part of running an organization effectively, but it also has some limitations. These include:

  • Difficulty in measuring performance: It can be difficult to accurately measure the performance of an operation, as there may be numerous factors that contribute to its success or failure.
  • Short-term focus: Operational controlling often focuses on short-term goals and objectives, which may not be reflective of the long-term success of the organization.
  • Limited scope: Operational controlling is focused on specific operations, so it may not take into account the overall performance of the organization.

Other approaches related to Operational controlling

In addition to operational controlling, there are a number of other approaches that can be used to ensure that operations are running effectively and efficiently. These include:

  • Quality control: This involves ensuring that products and services meet certain standards of quality. This can involve introducing quality assurance processes and testing products to make sure they meet the specified standards.
  • Cost control: This involves keeping costs within a certain budget. It includes monitoring costs, identifying areas of wasteful expenditure, and taking steps to reduce costs where possible.
  • Process improvement: This involves making changes to processes to make them more efficient. This can involve streamlining processes, introducing automation, or using new technologies.

Overall, there are a number of approaches that can be used to ensure that operations within an organization are running effectively and efficiently.

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