Why Controlling is Important in Management? – Successful Management

Management is a complex task, made up of diverse roles and responsibilities, all aimed at achieving organizational objectives in the most efficient way. One key function that stands at the heart of effective management is controlling. But what exactly does ‘controlling’ mean in the context of management? And why is it so vital?

In simple terms, controlling involves verifying whether everything occurs in confirmity with the plans adopted, instructions issued and principles established. It’s about ensuring that there is effective and efficient utilization of organizational resources so as to achieve the planned goals. Controlling, therefore, is a process that checks current performance against pre-determined standards contained in the plans, with a view to ensure adequate progress and satisfactory performance.

While controlling is a critical part of management, it is not the only function managers are tasked with. There are four primary functions of management that work together to achieve organizational goals: planning, organizing, leading, and controlling. Planning involves setting goals and determining the best way to achieve them. Organizing means arranging resources and tasks to meet those goals. Leading involves directing and motivating all involved parties and resolving any conflicts along the way. Lastly, controlling ensures that the company’s goals are met efficiently and effectively, completing the cycle of management functions.

As we move forward in this blog post, we’ll dive deeper into understanding controlling in management, discussing its various elements, explaining its crucial role in ensuring organizational success, and providing practical examples and tips on how to implement it effectively. So, let’s embark on this enlightening journey to explore why controlling is the key to successful management.

💡 Features of a Good Control System:

 Suitable: A good control system should be suitable for the needs and nature of the organisation.

 Simple: A good controlling system should be easy to operate and understand.

 Economical: The cost of setting, implementing, and maintaining a control system should not be more than the benefits gained from it.

 Flexible: A good control system should have the ability to adjust according to the changing business environment and internal conditions. 

Forward Looking: A good control system should move in a forward direction so that the managers can easily determine the deviations before they actually happen in the organisation.

 Objective: The standards of the organisation, its measurement of performance, and corrective actions should be impersonal and objective. 

 Management by exception: A good control system should focus its attention on the significant deviations which are crucial for the organisation, instead of looking for the deviation which does not have much impact on the business. 


Understanding Controlling in Management

Before we delve into the nuts and bolts of the controlling function in management, it’s crucial to define what it involves. Essentially, controlling in management refers to the process of monitoring, comparing, and correcting work performance. It’s a core management function that ensures all activities are carried out according to planned strategies, policies, and objectives. This function is vital in keeping an organization on track and ensuring it achieves its predetermined goals.

Setting Standards

The first step in the controlling process is setting standards. These are benchmarks against which performance is measured. They could be in terms of output (like sales targets), cost (budget limits), time (deadlines), or quality (degree of excellence). It’s important that these standards are clear, realistic, and aligned with the company’s overall goals. They act as the reference point for comparison when evaluating actual performance.

Measuring Performance

Once standards have been set, the next step is to measure actual performance. This involves collecting and recording data related to specific tasks or processes. The data may include sales figures, production rates, employee productivity, customer satisfaction levels, etc. The aim here is to gather enough information to understand whether the organization is progressing towards its goals or not. However, the measurement should be accurate and timely to allow for prompt corrective action if necessary.

Taking Corrective Action

The final element in the controlling function is taking corrective action. If a discrepancy is found between actual performance and the set standards, corrective actions are necessary. This could involve retraining staff, adjusting resources, revising strategies, or even changing the standards themselves. It’s a step that ensures deviations are minimized and performance is brought back on track. It’s worth noting that corrective action isn’t always about fixing errors; it can also be about reinforcing successful practices.

In essence, controlling in management is a systematic approach to ensure that the organization’s activities align with its objectives. By setting standards, measuring performance, and taking corrective action, managers can keep their teams focused and productive, thereby enhancing the chances of achieving business goals.

Why is Controlling Crucial in Management?

As we delve deeper into the realm of management, it becomes increasingly evident that controlling plays a pivotal role. But why is controlling so crucial? Let’s explore.

The Importance of Controlling in Meeting Organizational Goals

At the heart of every organization are its goals and objectives – the ultimate targets that it aspires to achieve. Without a mechanism to monitor progress towards these goals, an organization can easily veer off course. This is where controlling comes in. It acts as the compass, constantly checking the direction the organization is taking. It helps managers evaluate if the actions being taken are in sync with the set objectives.

By regularly measuring performance and comparing it with the established standards, managers can identify any deviations or shortcomings before they escalate into bigger problems. If the progress is not as per the plan, immediate corrective measures can be taken. Thus, controlling ensures that the organization stays on track to meet its goals, making it an indispensable part of management.

Controlling, Resource Efficiency, and Risk Management

Another major reason why controlling is critical in management is its contribution to the efficient use of resources. Every organization has limited resources, whether they are financial, human, or material. Controlling helps ensure that these resources are utilized optimally, preventing wastage and ensuring maximum output.

Furthermore, controlling also plays a significant role in risk management. By continually monitoring operations and performance, managers can identify potential risks and issues early on. This proactive approach allows for timely intervention, mitigating risks, and preventing crises. In this way, controlling aids in maintaining stability within the organization and contributes to its overall sustainability.

In essence, the significance of controlling in management cannot be overstated. It is the mechanism that keeps the organization aligned with its goals while promoting optimal resource use and effective risk management. As we’ll see in the next sections, controlling is also integral to sound decision-making and interacts closely with other key management functions. So, stay tuned as we continue to unravel the importance of controlling in successful management.

The Role of Controlling in Successful Management

One of the pivotal aspects of controlling in a management context is its profound influence on decision-making processes. Essentially, controlling serves as the backbone of effective decision making by providing a clear and accurate picture of an organization’s performance. This involves comparing actual performance with set standards, which highlights any deviations and discrepancies that need to be addressed.

The process of controlling equips managers with the insight to make informed decisions. For instance, if a certain department is consistently falling short of targets, managers can delve into the root cause of this underperformance and take corrective action. Without a robust controlling mechanism in place, such deviations might go unnoticed, leading to poor decision-making based on incomplete or inaccurate information.

Moving on, controlling also plays a crucial role in pinpointing inefficiencies within the organization. By regularly checking and comparing performance against standards, areas of inefficiency become apparent. This could be anything from wastage of resources to gaps in communication or even obsolete processes that hinder productivity.

Once these inefficiencies are identified, managers can work on implementing improvements. This may involve retraining staff, reallocating resources, or updating systems and processes. It’s important to note that the process of improvement is continuous and dynamic. As internal and external environments change, standards and goals may need to be revisited and revised, and controlling ensures that the organization keeps pace with these changes.

To sum up, controlling is an integral part of successful management. It not only enables better decision-making but also helps identify and rectify inefficiencies, facilitating continual improvement within the organization.

The Relationship between Controlling and Other Management Functions

In the world of business management, functions do not work in isolation. The controlling function of management, for example, is closely interlinked with other core functions like planning, organizing, and leading. Understanding this relationship is vital for successful management.

Interactions of Controlling with Planning, Organizing, and Leading

Controlling, as we’ve seen, is about setting standards, measuring performance against these standards, and taking corrective action where necessary. This process greatly influences and is influenced by other functional areas of management. When it comes to planning, controlling provides a feedback mechanism that highlights the effectiveness of the plans. If objectives aren’t being met, the control function signals this, helping managers revisit and revise their plans as needed.

Similarly, the relationship between controlling and organizing is also symbiotic. The organizing function establishes a structure within which activities are carried out. Effective controlling ensures that this structure operates as intended. It helps identify any inefficiencies or bottlenecks within the organizational structure and facilitates necessary adjustments.

Leading, often considered the human side of management, isn’t exempt from the influence of controlling either. Through effective controlling, managers can gain insights into how well they’re leading their teams. By identifying areas of underperformance, they can adjust their leadership strategies to better motivate and guide their personnel.

The Cyclical Nature of Management Functions

Management functions aren’t linear but cyclical in nature. They’re interdependent and feed into each other continuously. The planning function sets the stage by defining goals and choosing the best way to achieve them. These plans are then organized into actionable steps. Leaders motivate and direct employees to carry out these plans. The controlling function then measures the effectiveness of the plan, the structure, and leadership. Feedback from this process might result in revising the plan, reorganizing tasks, or altering leadership tactics.

This cyclical process ensures continuous improvement and adaptation in a dynamic business environment. Each function has a unique role to play, with controlling acting as the crucial link that binds all these functions together, ensuring they work in harmony towards achieving organizational objectives.

Practical Examples of Controlling in Management

Let’s delve into the realm of the real world to understand how controlling in management plays out in practical scenarios. Through these examples, we will observe both the success stories that arise from effective control and the cautionary tales that highlight the consequences of a lack of control.

Success Stories: The Power of Effective Control

One shining example of effective control in management comes from Toyota, the renowned automaker. Faced with a major crisis in 2009 due to widespread vehicle recalls, Toyota swiftly implemented strict controls to rectify the situation. They established stringent standards for product quality, measured performance rigorously against these standards, and took swift corrective action where necessary. This decisive control strategy not only helped Toyota weather the storm but also led to improved product quality in the long run.

Another instance is Apple Inc., which has thrived due to its rigorous control over its entire supply chain. By establishing exacting standards, continuously monitoring performance, and swiftly rectifying any deviations, Apple has managed to maintain a high level of quality and innovation in its products. This control has been integral to Apple’s success and its reputation as a leader in the tech industry.

Cautionary Tales: The Consequences of Lack of Control

However, the absence of effective control can lead to disastrous outcomes. Consider the case of Enron, the energy company that collapsed in a scandalous bankruptcy in 2001. A lack of control over financial reporting and auditing allowed fraudulent practices to go undetected for years, leading to one of the most notable corporate failures in history.

Similarly, the British construction firm Carillion declared bankruptcy in 2018 due to a lack of financial controls. Despite warnings of financial instability, there was a failure to take corrective action in time, leading to a catastrophic collapse that impacted thousands of jobs and numerous public projects.

In both these cases, a lack of control over key management functions resulted in significant harm to stakeholders and damage to the companies’ reputations.