Controlling: definition, process, and its links with planning, organising and directing

Definition of controlling

Controlling is the management function of monitoring the organisation's performance against its goals. It consists of setting standards of performance, measuring the performance actually achieved, comparing the two and correcting any shortfall. Put simply, controlling is the manager's way of making sure that what is being done is what was planned.

The process of controlling

The process has five steps, and they have to be taken in this order, since each step uses the result of the one before it.

1. Setting performance standards. Standards are the yardsticks against which performance will be judged. They may be quantitative, such as cost, revenue, units produced or time taken, or qualitative, such as goodwill or the morale of employees. They should be set so that they can be measured easily and kept flexible enough to be revised when conditions change. A quick-service restaurant in Hyderabad might fix the minutes a customer should wait to order and to collect the food.
2. Measuring actual performance. Performance is measured objectively and reliably, by personal observation, sample checking, performance reports or ratios such as return on investment.
3. Comparing actual performance with the standards. The comparison shows the deviation between what was expected and what was achieved; it is easiest where the standards are in numbers.
4. Analysing deviations. Some deviation is normal, so the manager first fixes the acceptable range and concentrates on key result areas, the critical points, letting only significant deviations reach senior management, which is the idea of management by exception. The causes are then traced: unrealistic standards, a faulty process, too few resources, structural weaknesses or factors outside the firm's control.
5. Taking corrective action. No action is needed while deviations stay within limits. Beyond them, the manager acts so that the deviation does not recur: training workers who miss production targets, adding people and equipment to a project running late, or, where the deviation cannot be corrected, revising the standard itself.

Two features of controlling show in this process. It does not close the management cycle: its corrective action is meant to improve future performance, so it leads back to planning for the next period; planning starts the management process and controlling completes it. And it is goal-oriented: it helps the organisation accomplish its goals, and also helps in judging whether the standards were sound, in using resources efficiently, in keeping order and discipline and in coordinating activities so that they all move in one direction.

How planning, organising, directing and controlling are related

The functions are interrelated, and in practice a manager rarely performs one in isolation from the others; it is often hard to say where one ends and the next begins.

• Planning settles beforehand the work to be done and the people who will do it: it fixes the goals and the route to them.
• Organising turns the plan into a working structure. It identifies the activities and resources the plan needs, groups tasks into departments and establishes who has authority and who reports to whom.
• Directing puts the structure into motion by leading, motivating, communicating with and supervising the people who do the work.
• Controlling checks whether the results match the plan.

The link between planning and controlling is the closest. Planning supplies the standards that controlling uses, so controlling without planning has nothing to measure against; and once a plan is in operation, controlling is needed to monitor progress and correct deviations, so planning without controlling is meaningless. Planning is not only forward-looking, since it draws on past experience, and controlling is not only backward-looking, since its corrective action improves future performance. Top management plans for the whole organisation; the structure is built and staffed according to those plans; directing makes sure they are carried out; and any gap between planned and actual results is taken up at the controlling stage.

An example shows the chain. A Tiruppur knitwear exporter plans to ship 50,000 garments in a quarter; it organises cutting, stitching and finishing units with supervisors for each; its managers direct and motivate the workers to meet daily targets; and controlling compares weekly output with the plan. When stitching falls behind, the firm adds a shift, and the next quarter's plan is set on the capacity it has actually seen.

Conclusion

Controlling completes the cycle that planning begins. Organising and directing carry the plan into action, and controlling measures the result and feeds what it learns back into the next plan, so the four functions work as one continuous process.