Definition
Control in management refers to the process by which managers monitor and regulate the efficiency and effectiveness of an organization’s resources and procedures. It is a key function in management that involves setting standards, measuring actual performance, and taking corrective action if necessary. The aim is typically to improve productivity, efficiency, and overall business performance.
Key Takeaways
- Control in management refers to the process where managers monitor organizational activities to ensure that they’re being executed as planned and any deviations corrected.
- It is a key element in successful finance management, helping identify potential risks, inefficiencies, or deviations from the strategic plan, thus providing an opportunity for proactive measures.
- It consists of four steps: setting performance standards, measuring actual performance, comparing measured performance against established standards, and making adjustments. This ensures performance remains within the organization’s strategic goals.
Importance
Control in management is a crucial aspect of financial operations because it allows for the monitoring and regulation of an organization’s resources.
It is a mechanism that aids in the identification of discrepancies or errors in financial activities, ensuring accurate and efficient use of financial resources.
This process helps in achieving the organization’s strategic goals by ensuring that activities are carried out according to plan, thereby preventing any chance of monetary loss or misuse.
Moreover, it provides a system for delivering feedback about the financial functioning of the organization, enabling it to adapt to market changes and improve profitability.
Therefore, control in management plays a pivotal role in preserving the financial health of an organization and its long-term viability.
Explanation
The primary purpose of control in management within the financial context is to ensure that the company’s objectives and strategies are met effectively and efficiently. This mechanism involves setting standards, measuring actual performance, and taking corrective action when necessary.
Through this process, management can maintain control over the company’s resources, mitigate risks, and improve overall business performance. Through a tracking system, financial controls can be put in place to monitor and manage income, expenses, and overall financial management.
Moreover, control in management offers a roadmap to guide the financial decision-making process. It ensures a company stays on track by monitoring and managing expenditures, preventing fraud, and optimizing operational efficiency.
It facilitates a robust framework for maintaining the necessary checks and balances, avoiding deviances, preventing financial mismanagement, and hence contributes to the long-term financial health and sustainability of an organization. Therefore, control in management plays an equally vital role, like planning or organizing, in driving the financial success of an entity.
Examples of Control In Management
Budgeting: In any organization, financial control is often exercised through budgeting. For instance, a company may estimate its expenses and revenues for the next fiscal year. Through the year, managers then control company finances to ensure that they are in line with these budgetary expectations to avoid overspending.
Investment controls: The finance department in a company tends to exercise control in management during decisions about investments. They may assess the potential returns and risks associated with each investment opportunity and hence influence the final decisions by the board or the CEO. This control may be exercised by setting thresholds for acceptable risks and returns.
Cost management: A clear example of control in financial management can be seen in how a manufacturing company manages its production costs. The management may decide to buy cheaper raw materials, implement more efficient production processes or negotiate better prices with suppliers to control costs. By doing so, they can increase the company’s profits and manage its finances more effectively.
FAQs on Control in Management
What is Control in Management?
Control in Management refers to the process of setting standards, measuring actual performance and taking corrective actions when necessary. It’s a part of the management function that ensures work activities are properly directed and helps preserve the business’ resources by minimizing waste and enhancing efficiency.
What are the Types of Control in Management?
There are three major types of control in management. These include feed-forward control, also known as preliminary or preventive control; concurrent control, also known as steering control, and feedback control. Each type has a unique role and is used at different stages of the management process.
Why is Control in Management important?
Control in Management is critical because it helps check errors and implements corrective actions, helping maintain project focus and efficiency. It also aids in reducing excessive costs, as well as ensuring that the organization’s plans are being carried out correctly and meeting the company’s objectives.
Can a company function without Control in Management?
While it’s theoretically possible for a company to function without Control in Management, it would likely face significant challenges. Without control processes, mistakes could go unnoticed, resources could be wasted, and the organization could struggle to meet its goals. Hence, Control in Management is essential for any successful company.
How is Control in Management exercised?
Control in Management is exercised by setting performance standards, monitoring actual performance, comparing actual performance with the standards, and taking corrective action if any deviations are found. Tools used may vary from simple systems like review meetings and progress reports to more complex management control systems.
Related Entrepreneurship Terms
- Budget Control: Process of monitoring, coordinating, and controlling financial resources.
- Internal Audit: A process of verifying the effectiveness of the company’s internal controls.
- Risk Management: Strategies implemented to understand and mitigate potential business risks.
- Financial Analysis: A detailed examination of a company’s financial health and stability.
- Compliance Management: Ensures that a company’s operations and procedures are according to financial laws and regulations.
Sources for More Information
- Investopedia: A website providing comprehensive definitions, explanations, and examples of various finance and investing terms including ‘Control in Management’
- Accounting Tools: A resource offering extensive information on accounting and finance concepts
- Harvard Business Review: A world-renowned resource for articles and information on a variety of business and management topics including ‘Control in Management’
- Mind Tools: Offers a host of online training and information on leadership and management skills, including ‘Control in Management’
