Role of Control in the Functioning of Organization

Role of Control in the Functioning of Organization

In the olden days, the most important control in the organization used to be the accounting related control. In the present day environment, control is a broader concept than the cost accounting. The present day organization interacts and communicates with a wide range of different stakeholders. For many of them, the accounting oriented control is neither the only, nor the most important type of control. This is particularly true for those organizations which adopt the modern management practices which are based mainly on innovations, for adapting the changes which take place in the environment in which the organizations function.

The word ‘control’ derives from the English verb ‘to control’ which means to run, and to manage. It is the management accounting which constitutes the basis of control. The concept of control was developed in the 1970s as a vehicle designed for preventing crisis situations leading the organizations to bankruptcy. A key principle of this concept, also referred to as ‘management according to deviations’, is the operational comparison of the main planned / normative / and factual indicators with the purpose of outlining the deviations between them. Control represents a group of methods for operational and strategic management that includes registration, planning, analysis and control, which are combined on a qualitatively new stage of the development of market relations into a unified system, the functioning of which is subordinated to a particular purpose.

Control in an organization is a process by which the organization strives to achieve the planned or desired results, or ‘performance’. It is the method for managing the organizational performance. In doing so, the organization takes various actions to minimize the negative effects arising from the external and internal environments. The control helps the organizational management to formulate key strategic objectives and plans and monitor their executions. In general, it is the process which is internal to the organization to suit the specific needs of the organization and is not subjected to any generally accepted standards. The techniques and tools used for the control are also internal to the organization.

Control ensures that there is effective and efficient utilization of organizational resources so as to achieve the organizational goal and objectives. Control has two basic purposes namely (i) to facilitate coordination, and (ii) to help in planning. A good control system provides timely information to the management which is very much useful for taking various actions for the efficient operation of the organizational processes.

There exist a number of definitions for the control. These definitions consider control as a certain element, a function, an action, a process, a result, an alternative, and so on. One of the first definitions of control in the organization (1949) stated that the control of an undertaking consists of seeing that everything is being carried out in accordance with the plan which has been adopted, the orders which have been given, and the principles which have been laid down. Its object is to point out mistakes so that they can be rectified and prevented from recurrence. A later definition of control (1965) defines control as the process through which the management ensures that resources are procured and used efficiently and effectively to meet the goals of the organization. In a more recent definition, control is considered as a specific, multi-step activity, starting with setting objectives and criteria, identifying the situation and comparing it with the desired status, ending with remedying shortcomings, and providing information for correcting plans and supporting decision makers. Some of the other popular definitions of the control are (i) control is ‘the process of checking to make certain that rules or standards are being applied’ (ii) control is ‘the act or activity of looking after and making decisions about something’, and (iii) control is ‘an influence on a controlled system with the aim of providing the required behaviour of the latter’.

Control in the organization comprises the specification of organizational standards for aligning the actions of the employees with the goal and objectives of the organization, as well as the monitoring and rewarding of the extent to which such standards are met. Control practices can consist of varying combinations of formal and informal controls. Formal controls rely on officially documented regulations and are frequently implemented by the management, whereas informal controls are based on norms and frequently enacted by peers. In addition, there are different control targets. For example outcome controls are focused on attaining goals and results, process controls are concerned with compliance with procedures, and normative controls are targeted toward value congruence among the employees. The aim of control practices is normally to ensure that employees are provided with information on relevant performance standards, to correct deviant behaviour, and to stimulate effective performance.

The organizational control theory examines the process by which one party attempts to influence the behaviour of another within a given system. Control in the organization is an inherently communicative activity which consists of verbal and physical actions designed to overcome resistance and exercise authority over others. Management can rely upon verbal commands (e.g., telling someone exactly what to do), written directives (e.g., giving employees a set of rules / procedures to follow), or even peer pressure (e.g., co-employees reinforce the importance of following organizational norms) to control the actions of the employees. Collective efforts (e.g., organizing) cannot be accomplished without individuals relinquishing some degree of autonomy in order to work toward a common objective.

Communication helps in the organizational control processes to understand the strategies and resources the organizational management draws upon to convince the employees to work together. Complicating the control process in the organization is the fact that management and the employees frequently have competing interests. Management typically wants to maximize the results in exchange for the lowest organizational cost. In contrast, employees can seek out ways to maximize their individual compensation while exerting the least amount of personal effort.

Controlling is the process by which the organizational management monitors and regulates how efficiently and effectively the organization and the employees are performing the activities necessary for achieving the organizational goal and objectives. Through control, the management monitors and evaluates whether the organizational strategy and structure are working as intended, how these can be improved, and how these can be changed if they are not working at a satisfactory level. Control involves keeping the organization on track and anticipating the events which can happen in the near future. Control also helps in keeping the employees motivated, focused upon important issues facing the organization, and working together to take advantage of opportunities.

Control plays an important role in management of the organization. However its role is frequently hidden from the sight of others. Organizational structure visualizes the scheme of organization. Unfortunately, there is nothing which helps to visualize the control system in the organization. Efficiency and effectiveness are very important terms for control in the organization. Through these terms the management tries to achieve the organizational goal and objectives. Effectiveness is related to the achievement of the goals which means that the action is effective to the extent the intended results have been achieved. Efficiency is related to the achievement of the results with minimal use of the resources.

Exercising proper organizational control helps to foster employees’ trust in the organization. The control practices can signal the organization’s predictability, fairness, and reliability. In other words, control can lead to perceived organizational goodwill and as such enable employees to have more trust in the organization. Control practices can also signal organizational ability and thus can enhance the belief that the organization is capable of delivering on its promises to both the employees and the external stakeholders.

Control involves tracking, measuring, and correcting the activities for ensuring a compliance of actual development with the planned one. Effective control needs the existence of plans, since planning provides the necessary performance standards or objectives. Control also needs a clear understanding of where responsibility for deviations from plans and / or standards lies. A good control system helps the organization in several ways as given below.

  • The management measures progress towards the organizational goal and objectives through the control. Control brings to light the deviations, if any, and indicates the corrective actions to be taken. Control thus, guides the organization and keeps it on the right track so that the organizational goal and objectives can be achieved.
  • A good control system in the organization enables the management to verify whether the standards set are accurate and serve the purpose. It keeps a careful check on the changes taking place in the organization and in the environment and helps to review and revise the standards in light of such changes.
  • By exercising control, the organizational management seeks to reduce the wastage of the resources. Each activity is to be performed in accordance with the predetermined standards and norms to ensure that the resources are used in the most effective and efficient manner.
  • An efficient control system ensures that the employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they are going to be appraised. It, thus, motivates them and helps them to give better performance.
  • Control in the organization creates an environment of order and discipline in the organization. It helps to minimize abnormal behaviour on the part of the employees by keeping a close check on their activities.
  • Control provides direction for all the activities of the organization and streamlines the efforts which are needed to be made for the achievement of the organizational goal and objectives. Each department and employee is governed by predetermined standards which are well coordinated with one another. This ensures that the organization remains on track to achieve the required performance levels.

The control system in the organization is very important since it measures or yardsticks which allow the organizational management to assess how efficiently the organization is producing its products which are needed by the market. Without a control system in place, the management does not have any idea how the organization is performing and how its performance can be improved. Organizational control is important in determining the quality of goods and services since it gives management feedback on the product quality. Effective management creates a control system which consistently monitors the quality of products so that they can make continuous improvements to quality. By developing a control system to evaluate how well customer-contact employees are performing their jobs, management can make the organization more responsive to the customers. Monitoring of employees’ behaviour can help the management to find ways for increasing the employees’ performance levels. Control can also raise the level of innovation in the organization by deciding on the appropriate control system for encouraging the risk taking.

Control is an approach which is pursued over a period of time. There is a period before the action which is known as the planning phase, and there is a period after the action which is known as the monitoring and analysis of results phase (Fig 1). Hence, the approach is progressive in the control process. Control cannot be reduced to a simple exercise of ‘verification’, since it then means that the organization is operating ‘after the act’, that is, once the decisions and actions have already been undertaken. In such a case, the scope of control is confined to reactions rather than fully effective action. In seeking to control the attainment of the desired outcomes and results, it is essential to prepare the action, to organize it, to perform simulations, and to anticipate the consequences. The planning phase is hence crucial.

Fig 1 The control process

The general function of the planning phase is to prepare for action. Its main components are described here. First of all, planning involves the setting of objectives. The planning comprises two notions (i) the kind of outcome or result desired, or a particular type of performance, and (ii) the level of performance desired. The first one is normally being referred by the term ‘objective’ while the second is normally referred by the term ‘target’. Of course, these two aspects of planning are intrinsically linked and in practice are frequently decided together. Therefore, the first role of planning is in fact to determine targeted objectives. The second role of planning is to anticipate how the organization goes about achieving these objectives. It is important to put a coherent system in place before launching into the action stage. Planning also involves decisions about the ways and means which are brought to bear, i.e. both the choice of action plans to be set in motion and the identification and mobilization of the resources which are necessary.

The further off the time horizon, the more the organization can anticipate and organize its action. But, inversely, risk levels are also be higher due to greater uncertainty. The function of the first planning tool, the strategic plan, is to determine the organizational ‘long-term’ objectives, finding a compromise between these two considerations (anticipation / risk). Strategic plans are normally formulated for a specific timeframe, but in reality it depends on the magnitude of the action plans being considered.

Control of the objective needs the creation of a path leading to the intended goal. This is done by setting milestones along the space-time corridor, which leads from the present situation to the long-term objective, in other words, breaking it down into shorter periods and creating intermediate stages. To achieve this, the strategic plan is assisted by two other planning tools namely (i) the operational plan, which translates the objectives to a mid-term plan, and (ii) the budget, which translates them to an even shorter time horizon. If the planning phase is done well, it serves as a valuable guide later for monitoring of the results. Thorough planning provides the management with reliable information on the level of performance achieved and enable it to focus on unfavourable variances.

The aim of planning is to anticipate, as much as possible, any potential difficulties in attaining the objectives, by setting targets properly, by formulating coherent action plans, and by allocating the necessary resources. Even so, it can happen that the results are not attained, particularly if the action plans are improperly implemented or unexpected events occur. Thus, it is necessary to monitor the results obtained. This is the downstream phase of the control process.

The purpose of monitoring is not merely to observe whether targets have been achieved or not. It is an integral part of overseeing the achievement of the objectives. It is not done at the end of the timeframe, but rather during the implementation of the action plans, which gives the management the chance to react mid-stream if the final result appears to be in jeopardy. Several methods exist for monitoring results.

Control in the organization is considered is one of the activities of the organizational management. Implementing of this activity is the function of the control system of the organization. In the control system, the control process corresponds to the process of activity and a control action corresponds to its result etc. Like any other system, control system is also based on an input-output model composed of a control subject, ‘the principal’, and a controlled subject ‘the agent’. Control action and external disturbances form the input of the system, while the action of the controlled subject forms the output of the system. Feedback provides the principal with information on the state of the agent. In the control system, both the principal and the agent carry out the corresponding activity. Combining the structure of both sorts of the activities, obtains the structure of control activity is obtained as shown in Fig 2. It is to be noted that from the agent’s point of view, the principal is a part of an external environment, which exerts an influence for a definite purpose. Environment influence of some components can even have a random, non-deterministic character, and be beyond the principal’s control. Along with actions of the controlled system, these actions exert an impact on the outcome (the state) of the controlled system (external disturbances). In what follows, the actions under consideration are reflected by nature uncertainty.

Fig 2 Model for the structure of the control activity

Classification of control

For a fixed system, control can be classified as (i) institutional control which can be administrative, commanding, restricting, and enforcing, (ii) motivational control which motivates the agents to perform necessary actions, and (iii) informational control which is persuading based on revelation of information and formation of beliefs, desires and motives.

The types of control normally exercised by the management can be distinguished based on regularity of the controlled processes. These controls can be dynamic control such as project management related to change management, innovation management etc, or static control such as process management which is a regular and repetitive activity under constant external conditions. Dynamic control, in turn, can be divided into reflectory (situational) control and forward-looking control.

The above classification of types (methods) of control is based on the organizational system consisting of (i) employees along with the external persons interacting with the employees, (ii) sets of feasible actions such as constraints and norms of activity imposed on the employees and these sets reflect institutional, technological, and other constraints and norms of their joint activity, (iii) preferences such as motives, purposes, etc. of the employees, and (iv) information such as data regarding essential parameters being available to the management at the moment of decision-making for choosing the strategies.

The employees determines ‘who’ is included into the system, the structure describes ‘who interacts with whom, who is subordinate etc.’, feasible sets define ‘who can do what’, goal functions represent ‘who wants what’, and information states ‘who knows what’.

Control is interpreted as an influence exerted on the organizational system to ensure the required behaviour. Control can affect each of the parameters listed, called by objects of control. The parameters of the organization can be modified during the process of control and as the result of control. Hence, using the object of control as the basis of classification of control in the organization, the types of control are (i) employees control, (ii) structure control, (iii) institutional control (control of constraints and norms of activity), (iv) motivational control (control of preferences and goals), and (v) informational control (control of information available to the management at the moment of decision-making) as shown in the Fig 3.

Fig 3 Classification of control based on control object

Employee control deals with the issues related to the human resource management and it also includes the issues of the employees training and development. As a rule, the problem of structure control is solved in parallel to that of employee’s control. Its solution answers several questions, such as that of control functions to employee’s distribution, of control and subordination assignment, etc. Institutional control appears to be the most stringent. In this type of control, the principal seeks to achieve the goals by restricting the sets of feasible actions and results of activity of the subordinates. Such restriction can be implemented through explicit or implicit influence (regulatory acts, directives, orders, etc) or mental and ethical norms, and corporate culture etc. Motivational control is seems to be ‘softer’ than the institutional control, and consists in purposeful modification of preferences of the subordinates. This modification is implemented through a certain system of penalties and / or incentives which stimulate a choice of a specific action and / or attaining a definite result of activity. As compared with institutional and motivational ones, informational control appears to be the ‘softest’ (most indirect) type of control.

Choosing various bases of classification, the different forms of control can be defined. Depending on the structure of control systems, the controls can be (i) hierarchical control which is control system based on the hierarchical structure in the organization and which defines the relationship between subordinates with their superiors, (ii) distributed control in which the same subordinate can have several superiors, e.g., matrix-type control structures, (iii) network control which is the distribution of control functions among elements of a system which can vary with time.

Depending on the number of controlled subjects, the control can be distinguished (i) individual control (control of a single agent), and (ii) group control (control of a group of agents, based on the results of their joint activity). Depending on whether control is adjusted to individual characteristics of the controlled subject, one can separate out (i) unified control (when the same control mechanism is applied to a group of subjects, and it is normally heterogeneous in nature), and (ii) personalized control (when control depends on individual features of each controlled subject).

Further, there are three different strategies which are followed for the control. As per the first approach control can be a simple control or a structured control. Simple control strategies need the intervention of a person to direct the employee behaviour and maintain order in the system. In contrast, structural control strategies move the control process out of the hands of individual supervisors and into the physical or discursive environment of the organization itself. These two categories differentiate between inter-personal and mediated strategies of managerial influence. Simple control provides employees with a clear source of authority to respond to and react against. However, structural forms of control de-personalize the managerial process and embed authority into the system itself. Structural control complicates employee’s resistance efforts since there is no clear source of authority for the employees to communicate with or to challenge.

As per the second approach control can be a normative control or a rational control. Normative control processes motivate and influence the employee behaviour by encouraging the development of strong personal relationships within the work environment. Organizational management use the shared and social aspects of the organization to persuade the employees to adopt attitudes and behaviours supportive of the organizational goal and objectives (e.g., happy employees are productive employees). In contrast, rational-control strategies influence employee behaviour by providing the employees with well-designed tasks, clear objectives, and reasonable incentives (e.g., a carefully trained employee is a productive employee). In a rational-control system, order is maintained and collective effort is achieved when employees understand their roles in the larger system and / or lack the resources necessary to effectively resist the organizational objectives.

As per the second approach control can be an obtrusive control or an unobtrusive control. Obtrusive control strategies rely upon external sources of influence to direct employees’ behaviour and accomplish organizational objectives. These control strategies are imposed upon the individual from the external environment. Obtrusive management control techniques do not presume that the organizational employees are willing or active participants in the control process. In contrast, unobtrusive control strategies need the employees to play an active role rather than a passive role in their own management. The employees are encouraged to forge a close bond or identification with the system as a whole. Unobtrusively controlled employees embrace the organizational values as their own and use them to make organizationally appropriate decisions.

Strategies of organizational control

There are five strategies namely (i) simple control, (ii) technical control, (iii) bureaucratic control, (iv) cultural control, and (v) concertive control (Fig 4). These control strategies are used by the organizational management to influence the employees’ behaviour.

Fig 4 Strategies of organizational control

Simple control – Simple control strategy needs the direct intervention of an authority figure to accomplish all three aspects of the control process. A line manager provides the initial direction to the employees, evaluates their performance, and then administers some sort of disciplinary action (reward or punishment). This control strategy relies upon the strength of the relationship between the line manager and the employees to maintain the order in the system. It is also a fairly obtrusive management strategy in which the employee is not required to internalize or actively participate in the control process. This can be a powerful management strategy because the line manager is directly involved with the entire process. However, this strategy can become compromised if the organization becomes too large or complex to control through line of sight management. As a result, simple control strategies tend to work best only in small organizations.

Technical control – Technical control strategy relies on the intervention of some physical device (e.g., machine, computer software etc.) to substitute for the presence of a line manager. Technical control strategies became particularly popular during the Industrial Revolution, when technological innovations and the mass production of goods encouraged organizations to grow in size. Rather than rely upon a line manager to tell employees how fast to work, a machine (e.g., a conveyor belt) can direct the pace of the production. Technological devices can also evaluate the degree to which employees are deviating from their assigned tasks or violating organizational policies (e.g., software which alerts the management when an employee visits a restricted Web site). Employees can even receive disciplinary information from an inanimate device rather than from a line manager (e.g., automated e-mail warnings sent to the employees when they fail to submit reports on time). Technical control enables managerial messages to be mediated through external devices, limiting the ability of the employees to question or resist these directives. Technical control can be an effective management strategy when the work performance is relatively repetitive and the span of the control of the line manager is too broad to monitor all the employees working under him through direct observation.

Bureaucratic control – Bureaucratic control strategies rely upon the regulatory systems to influence the employee behaviour and facilitate collective action. Technical control can work well for regulating the behaviour of some organizational employees, but it is not necessarily an effective strategy for influencing the behaviour of knowledge workers or managerial employees. Instead, the organizational management can attempt to direct the behaviour of these employees through the creation of regulation systems which carefully define how to perform specific tasks and make decisions (e.g., employee manuals and training programs). Bureaucratic control systems can also be used to evaluate employee compliance with the organizational directives (e.g., standardized performance measures). Also, organizational policies can discipline employee behaviour (e.g., bonuses determined by a pre-determined formula rather than left to the managerial discretion). Although the line manager can still be physically present within the work environment, bureaucratic control strategies reduce the time and effort they need to spend managing their employees. Even when there is no line manager present, the impersonal force of a carefully designed regulatory system extends to all corners of the organization and provides a consistent and rational basis for the managerial control.

Cultural control – Cultural control strategy influences employee behaviour by drawing upon the shared and social aspects of the organizational life. One weakness of bureaucratic control is that it is not possible to have regulations for every situation. Cultural management strategies address this control challenge by persuading the employees to make organizationally appropriate decisions even when there is no regulation system in place to guide them. Organizational management encourages employees to embrace organizational values as their own and use them to guide (direct) their behaviour within the work environment. Cultural control persuades employees to forge strong personal connections with their peers and feelings of loyalty towards the organization. Cultural control is an unobtrusive managerial strategy because the locus of control moves away from the external structure of the organization (regulatory systems, mechanized devices, and line managers etc.) and becomes internalized within the employees. Culturally controlled employees identify with the organization and monitor their own behaviour (evaluate and discipline) to ensure they make organizationally appropriate decisions. This is a particularly strong management control technique, but it needs that the employees have the opportunity to interact regularly with each other to maintain a cohesive sense of community within the work environment.

Concertive control – Concertive control strategy an extension of cultural management strategy. However, concertive control relies on the participatory organizational techniques, such as team-based management, to promote a strong feeling of ownership and empowerment among the employees. In a concertive system, employees work in concert with each other to achieve organizational objectives.  Employees are not only empowered to control their own behaviour for the benefit of the organization, they are also encouraged to take responsibility for the actions of their peers. Everyone in the team is simultaneously a supervisor and a subordinate. The concertive control can emphasize employee participation and empowerment, but it is also one of the most restrictive and powerful forms of organizational control. The identification employees feel with the organization and each other makes it particularly difficult for the employees to resist managerial control efforts. Additionally, since the employees are empowered to create their own rules and regulations, they also know where there can be weaknesses in the system. As a result, employees work together to close the gaps and further reduce their own opportunities for resistance. Ironically, concertive control systems illustrate that the more freedom employees have to participate in their own management, the more controlled they can become.

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