Managing the organizational performance:

Establishing effective controls

Levasana DouglasEastern University

Control is the regulation of organizational activities so that some targeted element of performance remains within acceptable limits. Without this regulation, organizations have no indication of how well they perform in relation to their goals. At any point in time, it compares where the organization is in terms of performance to where it is supposed to be. An organization without effective control procedures is not likely to reach its goals or, if it does reach them, to know that it has.

While interrelated with all of the other management functions, a special relationship exists between the planning function of management and controlling. Planning, essentially, is the deciding of goals and objectives and the means of reaching them. Controlling lets manager tell if the organization is on track for goal achievement, and if not, why not. A well-developed plan should provide benchmarks that can be used in the control process.

Controls serve other important roles including helping managers cope with uncertainty, detecting irregularities, identifying opportunities, handling complex situations, and decentralizing authority. Like planning, controlling responsibilities differ by managerial level with control responsibilities paralleling planning responsibilities at the strategic, tactical, and operational level.

An effective control environment

An environment in which competent people understand their responsibilities, the limits of their authority, and are knowledgeable, mindful and committed to doing what is right and doing it the right way. Employees in this environment are committed to following an organization's policies and procedures, and its ethical and behavioral standards.

The control environment encompasses technical competence and ethical commitment. It is an intangible factor that is essential to effective internal control. To enhance an organization's control environment, the governing board and management of the environment should: Establish and effectively communicate written policies and procedures, a code of ethics and standards of conduct, Behave in an ethical manner, creating a positive tone "at the top", require the same standard of conduct from everyone in the organization.

To set the tone, management should foster a strong environment that encourages: The highest levels of integrity, and personal and professional standards. A leadership philosophy and operating style that promotes internal control throughout the organization. Assignment of authority and responsibility. Effective human resource policies and procedures enhance an organization's control environment. These policies and procedures should address:

* Hiring

* Orientation

* Training

* Evaluations

* Counselling

* Promotions

* Compensation

* Disciplinary actions

The management environment is greatly influenced by the extent to which individuals recognize that they will be held accountable.

In the event that an employee does not comply with an organization's policies and procedures or behavioral standards, an organization must take appropriate disciplinary action to maintain an effective control environment.

Listed below are some tips to enhance a department's environment. This list is not all-inclusive, nor will every item apply to every department. It's a starting point.

* Provide:

Make sure that the following policies and procedures are.

* Written Procedures:

Available in your department (hard copy or Internet access):

* Administrative policies and procedures

* Business and finance bulletins

* Employee handbook

* Purchasing manual

* Personnel memorandum

Additionally, make sure that the department has a well-written departmental policies and procedures manual that addresses significant activities and unique issues.

* Define limits of responsibility:

Employee responsibilities, limits to authority, performance standards, control procedures and reporting relationships should be clear. Make sure that employees are well acquainted with the University's policies and procedures that pertain to their job responsibilities.

* Openly address ethics:

Discuss ethical issues with employees. If employees need additional guidance, issue departmental standards of conduct. Make sure that employees comply with the Conflict of Interest Policy and disclose potential conflicts of interest.

* Properly hire and train:

Make sure that job descriptions exist, clearly state responsibility for internal control, and correctly translate desired competence levels into requisite knowledge, skills and experience. Make sure that hiring practices result in hiring qualified individuals. Make sure that the department has an adequate training program for employees.

* Evaluate fairly and consistently:

Make sure that employee performance evaluations are conducted periodically.

Good performance should be valued and get positive recognition.

* Discipline as necessary:

Make sure that appropriate disciplinary action is taken when an employee does not comply with policies and procedures or behavioral standards.

The management of any organization must develop a control system tailored to its organization's goals and resources.

Measures of organizational performance

Employees need to see the connection between what they do and the outcomes.

The most frequently used organizational performance measures include organizational productivity, organizational effectiveness, and industry rankings.

* Organizational productivity

Organizational productivity is the overall output of goods or services produced divided by the inputs needed to generate that output. It's the management's job to increase this ratio.

* Organizational effectiveness

Organizational effectiveness is a measure of how appropriate organizational goals are and how well an organization is achieving those goals.

Managing control in organizations

Effective control whether at the operations, financial structural or strategic level, successfully regulates and monitors organizational activities.

To use the control process, managers must recognize the characteristics of effective control and understand how to identify and overcome occasional resistance to control.

Characteristics of effective control

Control systems tend to be most effective when they are integrated with planning and are when they are flexible, accurate, timely and objective. Effective control systems share several common characteristics. These characteristics are as follows:

* Integration with planning

Control should be linked with planning. The more explicit and precise this linkage, the more effective the control system. The best way to integrate planning and control is to account for control as plans develop.

* Flexibility:

The control system itself must be flexible enough to accommodate change.

* Accuracy:

Managers make a surprisingly large number of decisions based on inaccurate information. Field representatives may hedge their sales estimates to make themselves look better. Production managers may hide costs to meet their targets. Human resource managers may overestimate their minority recruiting prospects to meet affirmative action goals.

* Timeliness

Timeliness doesn't necessarily mean quickness; it rather describes a control system that provides information as often as is necessary.

* Objectivity

The control system should provide information that is as objective as possible.

To appreciate this, imagine the task of a manager responsible for control of his organization's human resources.

* A focus on critical points.

For example, controls are applied where failure cannot be tolerated or where costs cannot exceed a certain amount. The critical points include all the areas of an organization's operations that directly affect the success of its key operations.

* Acceptance by employees.

Employee involvement in the design of controls can increase acceptance.

* Comprehensibility.

Controls must be simple and easy to understand.

* Economic feasibility

Effective control systems answer questions such as, "How much does it cost?" "What will it save?" or "What are the returns on the investment?" In short, comparison of the costs to the benefits ensures that the benefits of controls outweigh the costs.

* Availability of information when needed

Deadlines, time needed to complete the project, costs associated with the project, and priority needs are apparent in these criteria. Costs are frequently attributed to time shortcomings or failures.

Resistance to control

Managers sometimes make the mistake of assuming that the value of an effective control system is self-evident to employees. This is not always so, however. Many employees resist control, especially if they feel over controlled, if they think that control is inappropriately focused or rewards in efficiency, or if they are uncomfortable with accountability.

* Over control:

Occasionally, organizations try to control too many things.

This becomes especially problematic when the control directly affects employee behavior. An organization that instruct its employees when to come to work, where to park, and when to leave for the day exerts considerable control over people's daily activities.

* Inappropriate focus:

The control system may be too narrow or it may focus too much on quantifiable variables and leave no room from analysis or interpretation.

* Rewards for inefficiency:

Imagine two operating departments that are approaching the end of the fiscal year. As with inappropriate focus, people resist the intent of this control and behave in ways that run counter to the organization's intent.

* Too much accountability:

Effective controls allow managers to determine whether employees successfully discharge their responsibilities. If standards are properly set and performance accurately measured, managers know when problems arise and which departments and individuals are responsible.

Overcoming resistance to control

Perhaps the best way to overcome resistance to control is to create effective to begin with.

If control systems are properly integrated with organizational planning and if the controls are flexible, accurate, timely, and objective, the organization is less likely to over control, to focus on inappropriate standards, or to reward inefficiency.

Two other ways to overcome resistance are encouraging participation and developing verification procedures.

* Encourage employee participation:

Participation can help overcome resistance to change.

By the same token, when employees are involved with planning and implementing the control system, they are less likely to resist it.

* Develop verification procedures:

Multiple standards and information systems provide checks and balances in control and allow the organization to verify the accuracy of performance indicators.