Methods of Establishing Control

Establishing control in management involves using systematic methods to ensure that actual performance aligns with planned objectives. Since organizations operate in dynamic environments, managers must adopt different control methods to monitor activities, detect deviations, and guide corrective actions.

Broadly, methods of establishing control can be divided into traditional and modern approaches. Traditional methods include budgetary control, where financial targets are compared with actual results, and statistical reports, which use charts, ratios, and comparisons to evaluate performance. Other methods like personal observation and audits also play an important role in monitoring efficiency and compliance.

Modern methods focus on enhancing decision-making through data and technology. Management Information Systems (MIS) provide timely information for analysis and decision-making, while Total Quality Management (TQM) emphasizes continuous improvement in processes and quality standards. PERT (Program Evaluation and Review Technique) and CPM (Critical Path Method) are also used to control projects by analyzing timelines and resources.

Together, these methods ensure better planning, resource optimization, and achievement of organizational objectives. The choice of method depends on the nature of operations, organizational needs, and the complexity of business activities.

Types of Control Techniques:

1. Direct Supervision and Observation

‘Direct Supervision and Observation’ is the oldest technique of controlling. The supervisor himself observes the employees and their work. This brings him in direct contact with the workers. So, many problems are solved during supervision. The supervisor gets first-hand information, and he has better understanding with the workers. This technique is most suitable for a small-sized business.

2. Financial Statements

All business organizations prepare Profit and Loss Account. It gives a summary of the income and expenses for a specified period. They also prepare Balance Sheet, which shows the financial position of the organization at the end of the specified period. Financial statements are used to control the organization. The figures of the current year can be compared with the previous year’s figures. Ratio analysis can be used to find out and analyses the financial statements. Ratio analysis helps to understand the profitability, liquidity and solvency position of the business.

3. Budgetary Control

Budgetary control is one of the most widely used methods of control, focusing on financial planning and monitoring. Under this system, managers prepare budgets for different departments such as sales, production, and expenses. Actual performance is compared with budgeted figures to identify deviations. For instance, if actual costs exceed the budget, corrective actions are taken to control spending. Budgetary control helps organizations allocate resources efficiently, prevents overspending, and maintains financial discipline. It is particularly effective in ensuring coordination between various departments.

4. Break Even Analysis

Break Even Analysis or Break Even Point is the point of no profit, no loss. For e.g. When an organization sells 50K cars it will break even. It means that, any sale below this point will cause losses and any sale above this point will earn profits. The Break-even analysis acts as a control device. It helps to find out the company’s performance. So the company can take collective action to improve its performance in the future. Break-even analysis is a simple control tool.

5. Return on Investment (ROI)

Investment consists of fixed assets and working capital used in business. Profit on the investment is a reward for risk taking. If the ROI is high then the financial performance of a business is good and vice-versa.

ROI is a tool to improve financial performance. It helps the business to compare its present performance with that of previous years’ performance. It helps to conduct inter-firm comparisons. It also shows the areas where corrective actions are needed.

6. Management by Objectives (MBO)

MBO facilitates planning and control. It must fulfill following requirements :-

• Objectives for individuals are jointly fixed by the superior and the subordinate.

• Periodic evaluation and regular feedback to evaluate individual performance.

• Achievement of objectives brings rewards to individuals.

7. Financial Statements and Audits

Financial statements such as balance sheets, profit and loss accounts, and cash flow statements are vital tools for control. They provide insights into the financial health and performance of the organization. Audits, both internal and external, ensure accuracy, compliance, and transparency in financial records. By analyzing financial data, managers can identify weaknesses like declining profitability or liquidity issues and take corrective measures. Audits also build trust among stakeholders and ensure that resources are used responsibly and effectively.

8. Management Information System (MIS)

MIS is a modern control tool that uses information technology to provide managers with timely and accurate data. It integrates data from different departments and presents it in structured formats such as dashboards, charts, and reports. For example, MIS can track sales trends, customer feedback, or production efficiency in real time. This helps managers detect deviations promptly and make informed decisions. By offering a comprehensive overview of organizational performance, MIS enhances coordination, reduces uncertainty, and supports strategic planning.

9. Program Evaluation and Review Technique (PERT)

PERT is a project management and control tool used to plan, schedule, and monitor complex projects. It identifies key activities, estimates time requirements, and determines potential delays. By analyzing various paths to complete a project, PERT highlights the most critical tasks. For instance, in construction projects, PERT ensures resources and time are allocated efficiently to meet deadlines. It helps managers evaluate risks, identify bottlenecks, and make adjustments, ensuring projects are completed within budget and on time.

10. Critical Path Method (CPM)

CPM is another project management control technique that focuses on scheduling and controlling activities to minimize delays. It identifies the longest sequence of tasks (the critical path) required to complete a project. By analyzing this path, managers can determine which tasks require priority attention. CPM helps allocate resources effectively and ensures timely completion of projects. For example, in software development, CPM ensures timely delivery by focusing on critical coding and testing phases. It enhances control over time and cost management.

11. Self-Control

Self-Control means self-directed control. A person is given freedom to set his own targets, evaluate his own performance and take corrective measures as and when required. Self-control is especially required for top level managers because they do not like external control.

The subordinates must be encouraged to use self-control because it is not good for the superior to control each and everything. However, self-control does not mean no control by the superiors. The superiors must control the important activities of the subordinates.